Paradigm lost: the imperial CEO: if a board wants to effectively oversee a CEO, what should be done? Here is one set of recommended steps.

• Author: Mills, D. Quinn
• Position: Board/CEO Relationship

WHAT FOLLOWS may be considered Corporation Organization 101, which is familiar to everyone who has attended a major business school in the past 20 years, but which has not made its way yet into the public consciousness, via either the media or political discussion.

There is no compelling reason why the CEO of a company should be a dominant figure, an imperial CEO. There are compelling reasons why this should not be so: It drives too many decisions to the top that should be made lower in the organization and closer to the customer, it causes lengthy delays in decisions and actions while initiatives make their slow way through a corporate chain of command (a bureaucracy) to the top for review and determination.

There is often a good reason why the CEO should be charismatic--because charisma helps to provide effective human leadership. This is important for building good morale in a company and for closing top-level sales, both important functions of a CEO. (Charismatic doesn't mean a celebrity; it's not a role but a characteristic of the individual's appeal to others.) Decisive, fast action at operational levels (in production facilities and in dealing with customers, both for sales and service) is a critical element of success in modern business. Mature reflection and careful shifts of strategic direction, as well as oversight of the outcome of lower-level decision making, are important at the top levels.

* It follows that collegial decision making is dangerous at operational levels, where quick decisiveness and single-minded direction are crucial.

* It follows that collegial decision making is appropriate at top corporate levels.

* It follows that except in unusual circumstances, in particular in a crisis or turnaround situation, the dominant-CEO paradigm is an error--it's an error as a prescription, and it's an error as a description of fact.

Deadly dominance

The truth is, it's where we had a dominant CEO that we got the scandals: the management of earnings, the falsification of sales and expenses, the hiding of debt via creative accounting and off-balance-sheet special-purpose entities, the loans from the corporation to top executives and their families, and so on. It is much more difficult, though not impossible, to have such violations of shareholder and employee interest where there is a shared responsibility at the top of the corporation rather than an imperial CEO. If it's objected that providing such oversight is the role of the...