Introduction
The question I am often asked often is “How does a board manage a strong CEO?” That is a good question. It may be difficult to harness the energy of a strong-minded CEO and should it be done?
There is a school of thought that says that the CEO is the most knowledgeable person the organization and the board should listen to him. There is another school of thought that would say that listening to a shrewd CEO is dangerous because the board can make decisions based on very biased information. This article discusses this issue.
When are CEOs Strong
Strong CEOs believe they are
- more knowledgeable than the board members
- the only opinion that really counts
- the person with the best interest of the organization at heart
- the only person who can identify and analyze all of the risks, and/or
- the person who knows the thoughts and beliefs of stakeholders.
The question is whether there are dangers inherent in any of those beliefs. A further look at each belief is necessary.
Knowledge
A CEO can rarely say he is more knowledgeable than the board members. He may have specific professional or situational knowledge that is extremely valuable. However, he may have gaps in his knowledge or be uninformed about circumstances which are known to the board members.
Some board members may be or have been CEOs of similar organizations. Others may have field-specific knowledge that is beyond the expertise of the CEO or have experiences with similar issues which could provide valuable insights to the board.
The only opinion that really counts
Recently, I had a call from a board member talking about the state the board finds itself in. The board listened to the CEO without considering the risks associated with his opinion. Now it finds that it is over-paying the CEO and using funds that were meant for programming to provide extra benefits.
You may say that, “This would never happen in our board.” In spite of such beliefs, things do happen and it is only in retrospect that board members admit that they were overpowered by the strength of their CEO and felt obligated to take his advice.
Best interest
Few people would argue that the CEO does not have the best interest of the entity at heart. However, it is imperative that each board step back and question whether the CEO
- sees their organization as a stepping stone
- is unwilling to make decisions or consider options which would make him look unpopular
- has an unusual desire to maintain an internal or external relationship at the expense of the organization
- has political aspirations, or
- has an unusual desire to enhance his benefits.
Usually, board members choose to sit on a board because they have the best interest of the entity at heart. Boards that work from that premise have the best chance of forming well-functioning, effective teams.
Risks
Many board members have knowledge which provides invaluable support as their boards grapple with complex issues. This knowledge could relate to areas such as
- law
- finances
- strategy development
- politics
- stakeholder perceptions
- strategies or directions of other entities which could impact on the board’s ability to set desired outcomes
- negotiations, or
- conflict resolution.
A strong CEO may think he knows all there is to know. However, the strength of the team should not be overruled in governance matters. The CEO’s strength should be in management. If it is not, many things can go wrong which could significantly impact the board.
Thoughts and beliefs of stakeholders
A CEO may be in touch with a percentage of stakeholders. What is that percentage? It is easy to say, “This is what I am hearing” or “This is what they said to me.” Who are they, what percentage of the group in question does the ‘they’ represent? The question is whether the CEO can more accurately predict the thoughts and beliefs of key stakeholders than the board. The caution always remains that it is possible to listen to a few or read a few papers and assume one knows what others are thinking.
The role of the board is to wear many ‘hats’ and as a result are expected to represent many of the following
- themselves
- their constituents
- business
- individuals or groups who are marginalized
- partners, and
- owners.
It would be difficult for a strong CEO to say that he is more aware of the thoughts and beliefs of all stakeholders in comparison to the collective wisdom of the full board. There will always be a percentage of people who will not tell the CEO what they really think unless they agree with him.
Final Comment
Many boards get into trouble when they put their unwavering trust in the advice of the CEO and follow his directions unconditionally. Why take that chance? If boards believe in teams, they will harness the energy of the CEO and channel his energy into managing rather than governing. The board will seek his advice, listen to the board members, hear from experts, follow current trends, solicit the input of key stakeholders, consider all options and consider the longitudinal risks of all decisions.
