Long-Term Relationship: Full confidence between corporate boards and CEOs requires trust, candor--and lots of strategic communication.

Author:Kelly, Kevin B.
Position:DIVERSIFIED SEARCH: GOVERNANCE LETTER - Interview
 
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Tony Earley understands the delicate board-CEO introductory dance more than most, and he realizes the pressure to build a good relationship right out of the gate is more important than ever before.

"The old stereotype of directors sitting around having a drink and smoking a cigar is long gone," says Earley, a Ford Motor Company director and the immediate past chairman and CEO of PG&E Corporation, a large public electric and gas utility based in San Francisco, who also served on the boards of MASCO and Comerica.

"There are no easy tips," he explains about building trust with the chief executive. "And it's become more difficult as the stakes have increased."

Today's directors shoulder responsibility for everything from the company's cybersecurity strategy to its sexual harassment policy. Engaging deeply and mulling difficult topics requires building trust not only with other board members but also with the entire management team--especially the CEO.

As a board member, the process of getting to know your new CEO can have make-it-or-break-it implications. Start off on the right foot and you've paved the way for a mutually beneficial partnership that can drive business performance for years. Get it wrong and you're looking at a future filled with tension. Or worse.

So how do you do it?

First, directors have to establish straightforward expectations and communication channels. Both management and directors need a clear understanding of their roles, and how interactions are going to work. Often, C-level executives join boards as independent directors and mistakenly assume they'll run the show as they always have.

"Some people want to show how much they know," Earley explains. "But they have to understand their job is not to run the company, it's to provide oversight. They re part of a team."

As Joel Trammell wrote in a thoughtful analysis for Inc. magazine last year, "A board that consists of mostly subject matter experts --e.g, CIOs, CSOs, CFOs--can quickly evolve into an operating entity." A CEO has to feel he or she is in charge while also being able to solicit the board for counsel.

That's something Kelly Romano knows well. A year ago she joined the board of Dorman Products, a national leader in automotive aftermarket parts distribution. It was right at the moment the board was tackling a CEO succession plan. The board eventually selected Dorman CFO Kevin M. Olsen, who assumed the role of president in August and will add the title of CEO in...

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