Boards should be concerned about their CEOs
A recent post on the Harvard Business Review site, What CEOs Really Think of Their Boards, makes interesting reading.
While the author’s early message is that boards need to tone down their oversight and “not adopt an adversarial, ‘show me’ posture toward management and its plans”, I think the real lesson to be learned from hearing what CEOs have to say is that careful, skeptical, oversight by the board is an absolute necessity more often than not!
But, before going further I should pay homage to some of the fine CEO’s I have worked with, including Tom O’Malley (Tosco), C.S. Park (Maxtor), and John Schwarz (Business Objects). Each was a fine balance of vision, leadership, entrepreneurship, and integrity.
Boards should tune their skepticism to each situation. When an executive has built and earned their trust, they will dial it down. Yet, when a proven executive floats an ambitious idea, they should exercise their oversight responsibilities with care and diligence.
What was it that rang some alarm bells for me? First, let’s consider that the great majority of board members are former or active CEOs themselves, followed by CFOs and others highly experienced in executive leadership. Any criticism of these people for being overly cautious, when their backgrounds and experiences are similar to the CEOs delivering the criticism, does not ring true. In fact, when natural risk-takers become cautious, I have to believe they have good reason.
- In theory, a board should serve as a check on a “cowboy CEO,” as one executive puts it. In reality, it can rein in boldness too tightly.
- CEOs complain that boards often lack the intestinal fortitude for the level of risk taking that healthy growth requires. “Board members are supposed to bring long-term prudence to a company,” as one CEO says, but this often translates to protecting the status quo and suppressing the bold thinking about reinvention that enterprises need when strategic contexts shift.
- CEOs are especially frustrated when directors’ risk aversion is driven by fears of bad press. They note that the rise in stakeholder and proxy-analyst pressures has made directors sensitive to any decision that might provoke a negative reaction from the media, proxy-advisory firms, institutional analysts, or activist investors.
Later in the paper, the author covers some important, but well-known, points about feeding the board with relevant and timely information, diversity, constructive and open dialogue, and the need for mutual respect. On balance, this is an interesting and useful read.
I welcome your views and comments.