How to get the most out of the CEO-board relationship

How to get the most out of the CEO-board relationship

The chief executive may sit on top of the company hierarchy, but they don’t have the final say on how things are run. Companies tend to have a board of directors overseeing their strategy, ensuring that the business does not stray from a course that benefits all stakeholders. In other words, the board is the boss’s boss. 

The C-suite-board relationship isn’t always, as we shall see, without tension. How can this be alleviated?

CEOs are keen on providing the company effective governance. They thrive best in highly collaborative environments, and value a board that can work with them and guide them to steering the business to the right direction.

A recent report from PricewaterhouseCoopers shows that ever more CEOs – a whopping 92% – are seeking higher turnover rates for their board. Reasons include: 

  • Poor performance. Perhaps the biggest concern of executives with their board directors is their performance, of which only 30% of the surveyed CEOs have a positive feedback. In particular, they need to be more attentive to modern issues which include artificial intelligence, sustainability and environmental concerns.
  • Shareholder activism. There may be directors or investors seeking to directly influence the way things are run in the company, and executives simply want them out.
  • Overboarding. The PwC report noted that 64% of CEOs think some of their directors serve in many other boards, meaning less time and focus poured into their company.

Friction between directors and the C-suite can also arise from the following:

  • Risk management. As boards are more concerned about the interests of their shareholders and key stakeholders, they are naturally risk-averse and CEOs may find it hard to get approval on bold, innovative ideas.
     
  • Industry expertise gap. Not all board members may have relevant and in-depth industry knowledge, causing disagreements and negatively affecting their strategic advice.
  • Timeliness and engagement. It can be easy for CEOs to be frustrated with passive, unengaged directors, whose delayed or nonexistent support hinders progress.

Building a bridge: Effective CEO-board dynamics

If these issues are sounding rather close to home, do not despair: the CEO-board relationship can be fixed and here are some ways to do so:

  • Maintain open communication. Clear communication can make a great difference in the relationship of directors and CEOs. It helps them understand each other’s concerns, and makes it easier for them to work together in developing solutions to pressing issues.
  • Define roles. It is important that the roles of the CEO and the directors don’t overlap. As such, their roles should be well-defined and properly delimited, eliminating the issue of overreach.
  • Effective board composition. The company should elect directors that complement each other and have the expertise needed to provide the best possible advice to their chief execs.

About Sam P

EnterpriseZone Staff Writer

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