CEOs and BoDs: What is their relationship?
After yesterday’s publication of my article on BoDs, I received yesterday 8 emails asking that question, so I decide to draft a quick response. I trust this article provides a clarifying answer to this question.
The CEO / Managing Director and the BoD.
Been a CEO or Managing Director (or Owner / Founder) of an organization is by definition a very lonely role. You can no real peers you can chat and the possibly all your CxO colleagues however great and supportive of you they might be, they are not always the best people to and bounce ideas and get clear impartial feedback.
The good news is that if you have a good BoD, then you have someone (ideally more than one) to go to and get him/her to listen to you, provide frank and impartial comments/ feedback and even mentorship (actually there is a article published on www.HIREgh.com on mentorship). Although usually there is a mentorship relationship between the CEO or Managing Director and the Chair of the BoD, of course that mentoring relationship could be with any Board member and/or even with more than one member.
The BoD is there to support you as head of an organization and to offer you all sorts of advice. Of course, it is up to you to decide which advice to follow or not, but if the BoD in a public company recommends something and by ignoring it you cause any sort of harm (e.g. financial, PR, etc.) to the organization, well the result would be …your head on a plate. Btw, you and the Chairman of the Board should ideally see each other Captain of and on the same boat. Obviously that has to be a relationship of mutual support since you both share the responsibility of the organization’s success. Of course that applies by extension to all your Board members; it’s a real partnership.
Remember that you as the CEO or Managing Director: you are responsible for the daily operations of the organization. So do not bring operational issues on the BoD Agenda (unless there is a major escalation need). But if you had created the right mentorship relationship with a Board member, s/he will provide an ‘avenue’ to reach for advice. Simply put:
CEO / Managing Director: S/he oversees the day-to-day operations of the organization.
BoD: They focus on the organization’s mission and in primarily defining the organization’s present and future.
Thus the Board is set up/ elected by all primary stakeholders of organization to ‘control’ the strategy that defines the future of the organization and as such, they are the ‘boss’ of the CEO / Managing Director who. The CEO is just hired to execute that strategic vision of the BoD.
The Chairman of the BoD -and possibly other Board members, maintain right attitude also on and succession issues.
Like in any human relationship, sure there could be a conflict between the BoD and the CEO / Managing Director, especially since all these different people have their own personalities and possibly their very own and unique management style(s). What makes even more unique and possibly more complicates the CEO / BoD relationship is that the BoD member might and would be changing every 3 years on the average.
Nonetheless, direct and high- impact communication between the CEO and his/her Board Chair is a must. They both have the essential responsibility to alert and communicate with each other when any problem(s) might arise =>Thus, there can’t be any secrets.
Back to the potential conflicts, here is a (partial) list:
- Differences of Views, Opinions and Focus.
- Differences in Management / Leadership Style.
- ‘Power’- Boundaries & Ownership Issues.
- Information Flow to the BoD
- Lack of trust from either party
- Ineffective communication between both parties
- Lack of support from the BoD
- Governance Issues
All these could lead to criticism of the way the other side performs on their duty and give birth to all possible interference with the other side’s responsibilities.
Keep in mind that the Chairman of the Board cannot hesitate to act when the standards of governance & fiduciary responsibility require intervention.
Information Flow to the BoD
The CEO / Managing Director is the one who provides the BoD with all sorts of information about the organization and s/he might choose what information to provide and at what granularity level.
Since the BoD could also set limits on financial and related operating issues for senior management, information flow to them is for paramount importance.
It also helps them perform their accountability responsibilities better and to better evaluate the organization’s activities against the defined vision and mission statements, thus ensuring that the organization is meeting its original purpose for being.
The CEO / Managing Director is required –especially in Not-for-Profit organizations, to prepare annual budgets and financial reports and present them to the BoD for review and approval. The BoD has to review, analyse and even monitor the information provided and presented by the CEO; it is the responsibility of the BoD to ask additional information since the BoD is ultimately (even possibly legally) responsible for the financial wellbeing health of the organization
Remember: the information flows between the CEO and the BoD – the BoD is to never communicate directly with the organization’s staff!
CEO & BoD Obligations
The BoD’s obligations to the CEO:
- Open, clear, transparent and continuous communication
- Prompt, thoughtful and clear response to all requests for support / guidance.
- Enable the CEO to drive the organization to its max performance
- A clear job and role description / statement- of- duties and measurable performance goals
- Regular formal performance reviews (ideally more than once a year)
- Constructive informal feedback on job performance
- Governance health- checkups / monitoring
- Compensation & benefits package
- Bonus / Rewards for outstanding performance
The CEO’s obligations to the Board are:
- Open, clear, transparent and continuous communication
- Proactively seeks BoD input, even outside of board meetings:
- Financial Reporting
- Active Enablement of the organizational vision and mission
- Sensitivity to the communities s/he serves
- Effective representation of the organization in the community
- Prompt and thoughtful response to Board member’s requests for information
Just keep in mind that:
- Your BoD members want to be helpful
- Your BoD what to partner with you in a long term good relationship
- Your BoD want to actively participate in the constant direction setting
- Your Board members want to make a visible and quantifiable impact
So, please develop a real human relationship with them besides that of a PowerPoint!
About the Author: Spiros Tsaltas is a seasoned PR and Management Consultant; he is also a former University Professor (RSM MBA, CUNY, etc). Spiros has hands-on experience on setting up all sorts of Startups both in the US and in Europe. He is an active transformational leader and strategist who has also years-long experience with Boards of Advisors and Boards of Directors. He is currently assisting a couple of Ghanaian companies with the setup of their BoDs.
© 2018 Spiros Tsaltas and © 2018 HireLoyalty