A board's most crucial task.

• Author: Horton, Thomas R.
• Position: Selection of company CEO

What is essential in selecting the right person as CEO? Luck, of course, helps -- but what else?

LIKE ROCK 'N' ROLL and big-time sports, governance is now everywhere. Boardroom denizens provide grist for the business press, for specialized newsletters and journals, even for university courses. Furthermore, today's corporate director has ready access to all kinds of advice. The great outpouring of how-to publications ranges from public accounting firms' booklets to reports of various Blue Ribbon Commissions to even more comprehensive guidelines on every aspect of governance.

Still, underlying all of this useful counsel as to how better to perform our mission of oversight is one basic truth: Beyond a doubt, what we need to get right, above all else, is the selection of the CEO.

If we have failed to select as CEO a leader who can drive the company forward to a successful future, we have failed in our most crucial task. If we have filled the chief's position with the wrong person, we have failed ultimately. Sadly, this happens more often than it should.

Whenever this does occur, there is trouble ahead, trouble that may be only slowly discerned. Typically, once a new chief executive takes office, there is a great, collective sigh of relief, especially on the part of the exhausted members of the search committee. The candidate garnered extraordinary praise from the references, so once the offer is accepted, there is jubilation all around.

Now, however, little signs begin to appear. The forecast is missed not just once but three times in a row. Other surprises arrive. Your new leader seems less than enthusiastic about directors' suggestions. A couple of your company's very best people leave with scant notice. The president of your largest customer makes a comment about the new CEO that is difficult to interpret charitably. You begin to notice small groups of directors talking furtively during breaks.

Whatever the symptoms, it may take a lot of them to convince the board that such an egregious error could have been made. One member suggests individual counseling, while another suggests that a small committee be assembled to "help the fellow overcome these little entry problems." Denial on the part of the board continues until it finally becomes clear to all that somehow the candidate who once looked so perfect has metamorphosed into a poor fit. A consensus develops that it is, regrettably, time to make another change.

The questions on everyone's...