Unease in the Board CEO relationship
Harmony at board level is critical to a company’s success, but perhaps even more important is the healthy relationship between the board of directors and the CEO.
This has the greatest impact on the success or otherwise of a company. The central issue is whether these are working together in the best interests of the company. The quality of relationship between the company and all its stakeholders reflects the quality of relationship that exists between the board and the CEO.
Board directors complain that that the CEOs do not provide them with enough information and that they only get to know about a crisis when it is already well advanced or too late. On many occasions they also feel that the executive team is not exposed to them and that the CEO hides the executives from the board either not to expose their weaknesses or not to let them shine too much in the eyes of the directors. On the other hand, the CEO sees the board as a necessary evil, a nuisance as questions are asked, more reports are requested, emotions sometimes (very wrongly) flare up and people get offended. Terrible, but sadly very real. CEOs complain that the directors’ main concern is risk and that their risk aversion will hamper business development and growth. They also complain that non-executive and independent directors do not spend enough time to learn about the company, the industry and the market. The smartest and sharpest CEOs complain that there is no discussion or debate at board level.
A few points on a healthy relationship between CEO and the board. First, do they both understand each other’s roles and responsibilities, and do they understand that they are accountable for their decisions and actions? Second, the Chairman of the board has a crucial role to play in keeping harmony between the board the CEO – a weak board of directors is a sign of weak chairmanship. Thirdly, is there enough productive debate and probing at board level and is the CEO being challenged enough with difficult, intelligent questions? CEOs must feel that they are being examined by the board directors and that meetings must never be a pleasant cup of tea.
Relationships between the board and the CEOs must be positive, constructive and more importantly, professional. They must never be too cosy and too easy. Friendship yes, but not familiarity. They must be based on mutual respect, honesty, integrity, and transparency. They must be based on effective communication. The CEO rightly expects to align to a vision, a strategy, policies and decisions that are consistent and predictable. A board of directors that continuously changes its mind is a disaster formula for both the CEO and the company.
One or both sides can be at fault. Are you ready to test your board of directors’ state of health?
About the author(s)
Joseph F.X. Zahra is a Malta based economist with over thirty five years of corporate leadership and business consultancy experience.