When the Chief Executive Dominates the Board
It is not uncommon to find boards that are, to all intents and purposes, subordinate to their chief executive. This may result from chief executive personality traits that have a negative impact well beyond the boardroom. More often, though, it is a problem the board has inadvertently brought on itself. The chief executive dominates because the board allows - even encourages - it. Such a pattern is often established without conscious thought on either the board's or the chief executive's part.
Neither board nor chief executive know how to work together
Twenty-five years ago, when I became a chief executive for the first time, there was none of the consciousness and knowledge there is today about the systems and processes that support good corporate governance. My mental model of how the working relationship between board and chief executive should play out was incomplete to say the least. But I was lucky. I had a very experienced and competent chair, a lawyer with a well-articulated sense of the constitutionality of the governance role. He was clear what the governing body should expect of its chief executive. Another director was a very experienced, recently retired, chief executive. I realise now that he subtly supported and guided me until I found my feet in the role and formed a partnership with the board that I like to think drew the best from us both. Sometimes, however, neither a board nor its chief executive have a clear understanding of their respective roles or how to link them effectively. In those situations it is easy for a chief executive to fall into a dominant role that leaves the board feeling marginalised.
The board does not really know what its job is and how to do it
There is a degree of parallel when I think about my first real governance role. Then (the mid-1980s) 'governance' was not a word in common parlance in an organisational setting. There was none of the infrastructure that exists today like formal board charters defining governance roles and performance expectations. Even the relevant legislation was 'governance-lite' when it came to boards and directors' responsibilities. There was no specific governance training available or even thought necessary. Structured board and director performance evaluation? Unheard of and unimaginable. An invitation to join a board was often an honour acknowledging past achievements and an opportunity to join an exclusive group whose purpose was as much collegial as fiduciary.
Starting with the global sharemarket crash in 1987 there have been a series of corporate failures that have progressively and repeatedly emphasised the critical importance of boardroom effectiveness. Many positive developments have been stimulated by those failures of governance. These have increased understanding and application of the board's role and responsibilities. There are still boards, however, that muddle along without structure or discipline to their work. They lack explicit definition of their work product and the processes needed to deliver it. Such boards leave a leadership vacuum that any effective chief executive will be obliged to fill.
- A failure to recognise the inherent asymmetry of power between a board and its chief executive
Part of the problem lies in one of the many paradoxes inherent in corporate governance. The board has constitutional power while the chief executive has substantial control over the primary resource - information - the board needs to do its job. There is thus an inbuilt tendency to an imbalance one way or the other in the relationship. If the board does not know how to use its positional power appropriately and effectively it can easily become putty in the chief executive's hands. Saying that is not to be critical of chief executives or to impugn their motives. If their board is not up to the job chief executives will generally do what they think they need to do to get their job done. But, unless both parties are conscious that this tendency to imbalance exists, and that it needs to be attended to, the relationship is likely to end in tears.
- The board's operating mode defaults to 'followership'
Surprisingly, even today, we see boards that expect their chief executives to take such a lead that dominance is invited and almost guaranteed. This is particularly likely if the board is in awe of the chief executive's reputation or expertise or in thrall to his or her charismatic personality. However, this is compounded when a board, philosophically, takes the view it has done its job when the chief executive appointment process is complete. I have heard more than one experienced company director say that it is the board's principle job to 'find a good chief executive and then get out of his way!' Adopting this attitude can easily see the board retreating to the side-line to take up the role of cheerleader. Thereafter, it is difficult for the board to do little more than react to (and usually accede to) the chief executive's initiatives. Board meetings tend towards monologue rather than dialogue. A board meeting is more or less a continuous presentation with the board in the audience rather than at the podium. Such boards are increasingly dependent on their chief executive.
- The board lacks a mind of its own
This occurs when boards do not manage their work in a way that facilitates the development of the necessary collective consciousness around the board table. Directors play little part in setting the agenda for their own meetings. They simply react to what is put in front of them by management. The meeting structure is likely to be dominated by the chief executive's report. Along with other reporting to the board this often pulls the board down into the operational realm where the chief executive is (or should be) king. The chief executive and other staff dominate the airtime during the board meeting. The board is effectively prevented from developing a well-considered, coherent and cohesive view on anything important. As the world moves on the board is almost always several steps behind the chief executive.
There can also be structural reasons why boards find it difficult to find their own voice. An obvious example is where the chief executive also occupies the board chair role. Excessive churn in board membership may also be 'structural'. I was once an 'independent' on a board the majority of whose members were on the board because of a short-term elective office they held. The board met infrequently and it often seemed introductions were necessary at every meeting. While this was an extreme example many boards are never settled long enough for anything like teamwork within the board and between board and management to develop.
Boards that are too large have the same problem. As soon as numbers start to creep into the teens it becomes very difficult to develop the collective consciousness required to give direction to an organisation (or chief executive). Air time is difficult to obtain particularly for the naturally 'quieter' board members. Participation is uneven as is the rate of learning. Individual agendas more easily play out and factions are more likely to develop. Agreement is more difficult to achieve and is weaker. In the absence of a strong, consistent and single voice from the board the chief executive inevitably exercises control.
- Weak board leadership
Effective board performance and a balanced board/management relationship seldom occurs in the absence of an effective board leader. If the board chair is ineffectual the chief executive can easily (perhaps even necessarily) become the de facto leader of the board. Consequently, the chair must be confident in articulating and asserting the board's rightful role and be able to lead it to fulfil that. The chair must also be able to 'guide' the chief executive in a productive and mutually respectful relationship between management and the board. The interests of these two groups must align but in the end, as the board is accountable for organisational performance, its will must prevail.
The seeds of a solution to undue dominance are present in these descriptions but we will explore more explicitly some of the measures a board might take to manage this risk in a future issue. Taking effective steps to avoid undue chief executive dominance is as much in the chief executive's interests as that of the board. The roles of board and chief executive are symbiotic or mutually interdependent. Few chief executives are likely to be able to fulfill their potential in the role when their board is not up to (and up for) its own job.