First when I began to look at the role of boards, it became clear that the combined role of board chair and CEO could lead to potential problems. Then when cases such as Enron were in the news, it became clear that some of the concerns were indeed justified.
Questions
Some of my questions are as follows
1. Who reports to whom?
2. How does the separation of governance and management occur?
3. How does the board separate the evaluation of CEO from the evaluation of the
chairperson (a person could be a competent CEO and not a competent
chairperson or vice versa)?
4. How does such a board adjudicate conflict between management and the board?
5. Who does another board member(s) consult when he has an issue with the CEO
or Chairperson?
6. Who is the neutral person designated to facilitate executive sessions and ensure
all voices are heard?
7. Who resolves conflict between the board and the CEO?
8. Who chairs executive sessions of the board when it is necessary to exclude to
the CEO?
It is necessary to answer these questions to avoid a situation such as the one described below.
An Example
The Globe and Mail reported on Thursday, January 12, 2012 (P. A6), that the Ontario Government removed the CEO/Board Chair and board of ORNGE which is responsible for the air ambulance system. In this case the issues related to high salaries and other financial questions. These issues came to light after an investigation by the Auditor General and a team from the Department of Finance. These teams were unable to get answers to their questions.
Boards can avoid such a situation if they take constructive action.
Action Required
It is imperative for boards which have combined the position of Board Chair and CEO to have processes in place to govern the risks associated with such an arrangement.
What are your board’s arrangement?
