The best way the board can be helpful to the CEO.
Author | Midanek, Deborah Hicks |
Position | DUTIES OF DIRECTORS - Cover story |
Twice in my career as a turnaround executive a nonexecutive chairman of a NYSE-traded company has called me to ask for help. Their companies were floundering, and each asked the same question: will you need to replace my CEO? While I was very impressed that these men each took the initiative to address the issues their companies were facing, it intrigued me that they perceived handling the CEO to be a difficult issue. Why was this?
I came to know that the members of each board were highly competent people, distinguished in their careers. Each of the companies had been seen as an exemplar of the best of breed. Each CEO had been celebrated as an effective leader. And each board had interpreted themselves as the supporter of the CEO. The chairmen who called had gotten too close to the CEOs in question. In effect, they were calling for an outsider to help them do what they needed to do: hold the CEO accountable. Or else.
There are some important lessons in these two parallel situations. In my view, the seeds of the ultimate failure of the boards and their CEOs were sown in their success, which is a common pattern. The CEOs became larger than life not only in the eyes of the public but in the eyes of their boards. Their inclination was to protect the CEO, given the success he had apparently created, until it was too late. Along the way, they had become too close to him personally to be able easily to hold him accountable.
How to protect against this? Consider first principles: who is responsible for what. The board is responsible for the perpetual life of the corporation, and its overall health, just as a parent is responsible for the welfare of a child. To ensure that life and health, the parent instills the habits of self-reliance and independence while keeping a weather eye, and a skeptical one, on the key indicators of progress.
Though cordial and trusting relationships between management and board are imperative and must be nurtured, directors cannot forget ever that...
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