The relationship between the CEO and the Board of Directors
Recently a lot has been made of the relationship between a CEO and their board of directors. Mark Hurd recently ousted by the HP board is a case in point. This had nothing to do with performance, and everything to do with the relationship, communication, and trust.
Last week I attended a discussion hosted by NACD which included Lynn Elsenhams, CEO of Sunoco, and Walter D’Alessio, lead director for Exelon among many other accomplishments. Here were a couple of nuggets from that discussion that I thought I would share.
- It is important to differentiate between the board as a collective and the board as individuals. I see often that people talk about “the board” as it if were of one mind and body. A board, if done right, has many minds and many opinions. Yes, some votes are unanimous, but most of the important discussions involve conflict and different thinking. That is the value of the board.
- Boards should always be evaluating themselves. Boards are certainly not infallible, and certainly need to be improved and modified over time. I’ve talked about teams of all kinds having a skills or experience matrix. Boards should be working to the same process.
- The board is meant to be skeptical and provide tough feedback. Just because some tough questions are asked, doesn’t mean the board thinks the management team is doing a bad job. They might be doing a great job, but they should still get tough questions. The CEO sometimes needs to be the buffer of the natural skepticism and negativity to the management to ensure the right message is being taken away.
- It is important for the board to understand the hand that management has been dealt – this means everything from the economy to regulatory changes to previous management decisions. What matters is what the management team does with the hand that it’s been dealt.
- The board is as much about being a business partner to management as it is about governance. If it’s seen only as governance, second-guessing, and control, then the value of the relationship will not be fully realized.
These were a few of the take-away lessons. How other advice would you provide boards, CEOs, and their management teams on managing this important relationship?