Relationships come in all shapes, sizes and forms. Good relationships are built on a sense of mutual trust and understanding. In the corporate world, the CEO board relationship is crucial to the organization’s performance and for promoting an overall healthy corporate culture.
The CEO, the Non-Executive Chairman and each board director share responsibility for building healthy relationships with each other. The foundation for each relationship rests on each person understanding their role and how it complements the other’s roles. Good communication and regular communication are the keys to building mutually beneficial, trusted CEO-board relationships.
The Role of the Non-Executive Chair
The main role of the non-executive chair is to stand as mentor and advisor to the CEO on all matters. The non-executive chair offers an open-door policy that allows for a listening ear. The chair guides the CEO on how to put the board’s strategy into action. There’s a fine balance between overseeing organizational performance and micromanaging the CEO. The best approach is to ask deep, probing questions about the logic behind decisions and the changing aspects of organizational performance. The chair’s level of commitment should be deep, energetic and clearly evident.
Oversight requires the ability of the non-executive director to uphold good corporate governance standards and to ensure fiduciary responsibility. The chair shouldn’t show reluctance to confront situations where fidelity to governance is in question. Acting as a liaison between the board and the CEO, the non-executive chair works in collaboration with them to establish expectations, agendas and processes that clearly communicate information the board needs to make decisions and the CEO needs to fulfill the board’s expectations. The chair should also work to build professional relationships with key members of the management team and be available to them as needed. Finally, the chairman takes the lead on CEO succession planning.
The Role of the CEO
CEOs can effectively enhance relationships with board directors inside and outside the boardroom. Regular interaction with board members helps to build trust and rapport, which aids in developing enhanced dynamics between the CEO and the board. Informal communication sets the stage for feedback on guidance and strategy, as well as predicting potential areas of disagreement. One of the keys to inciting trust is for the CEO to communicate proactively and transparently at all times. The board doesn’t like surprises, especially when they involve crises.
A sharply attuned CEO will bring key members of management into board discussions at the opportune time. This provides a chance for the board to offer sage advice while getting a glimpse of whether certain managers could be considered in the succession planning process. Just as the non-executive director should effectively challenge the CEO’s logic, the CEO should also be prepared to challenge the board’s assumptions. Finally, the CEO should support diversity on the board and be committed to the notion of having an independent chair and independent board directors.
The Role of the Board Director
Board directors should stand ready to advise the CEO on implementing strategic plans at all times. CEOs should feel that the board is open and available to them as needed. While board directors need to work on building a strong relationship with the CEO, they also need to demonstrate the courage to ask tough, penetrating questions about the CEO’s approach to decision-making and the status of the organization’s performance.
Identical to the non-executive director, board directors need to be quick to act on issues related to poor governance and irresponsibility toward fiduciary duties, which are an important part of board responsibilities. Board directors also share responsibility with the non-executive director for having a strong commitment to the organization, being actively engaged, and bringing a spirit of collaboration and teamwork to the table.
Shared Responsibilities for the Non-Executive Director, CEO and Board Directors
CEOs and their boards should work toward building close, trusting relationships, but that doesn’t mean that they should always agree or give in when they feel they shouldn’t. The board should contain the necessary level of independence to remain objective when hearing the CEO’s recommendations and when evaluating the CEO’s performance. The board and the CEO should be clear on their expectations for themselves and each other. Their goals and objectives should be clear, and all the players should keep their promises and commitments. In addition, all individuals should understand their roles and responsibilities and be careful not to overstep their roles.
A little humility in these board relationships goes a long way. Each person fills a specific need on the board and all parties need to be aware of their weaknesses and limitations. Several things should go without saying. Boards and CEOs need to demonstrate honesty, trust, respect and transparency in their opinions, plans and motivations. Certainly, all individuals should recognize that they have an obligation to work in the best interests of the company at all times.
Managing the CEO Board Relationship
Certain topics between board directors and CEOs should be regular fare. Board directors should have a good feel for the things that keep the CEO up at night, and they should spend some sleepless nights trying to solve such problems. Board directors and CEOs should be equally and regularly in the loop with regard to financial reports. They should expect to ramp up discussions when the financial reports show red flags or don’t appear to meet expectations. Key priorities and following up on action items should also be areas of weekly discussion.
CEOs and boards create risks by using insecure messaging applications. Diligent Messenger is a secure messaging tool that was designed for secure board and CEO communications. Messenger enables real-time collaboration wherever the board and the CEO happen to be. Board directors can set up their own groups and contacts to ensure privacy. Messenger gives boards and CEOs the ability to disable such features as the “copy and paste” function as well as the ability to retract messages. In addition, boards and CEOs can set the system up to receive notifications when they send and receive messages. Diligent Messenger, along with the other fully integrated tools that comprise Governance Cloud, work together to support and enhance the CEO-board relationship.