Getting the CEO-board relationship right is critical

By Parmi Natesan and Dr Prieur du Plessis

Boards and CEOs must have a professional, productive relationship or the organisation will suffer. Here are some tips for getting this vital relationship right.

High-performing boards and CEOs are both essential for any organisation to prosper. But they must work in tandem.
Who can forget the Old Mutual case when the then CEO Peter Moyo’s relationship with the board broke down: nine months of adverse publicity and a significant dip in its share price, at one stage a staggering R9,7 billion wiped off the company’s market capitalisation.

The relationship between the board of CNA and its former CEO, Benjamin Trisk, has been in the news of late, and arguably prompted the largest shareholder to sell its stake.
Other instances include ABSA parting ways with its CEO, Daniel Mminele, over disagreement on strategic direction, the resignation of the African Bank CEO, Basani Maluleke, after “conflict with its chairperson”, and the removal of the CEO of Daybreak Farms because of an “irretrievable breakdown” in his relationship with the board.

Clearly, this is a critical relationship, but one that all parties must get right. What are the principles that should be followed to give it the best chance of success?

Points for the board and its chair to consider
The relationship between the board and management will largely be a function of the relationship between the board’s chair and the CEO. Ideally, the former should act as a mentor to the latter, and be prepared to ask the necessary deep questions that will help the CEO to refine his or her thinking. To a lesser extent, the whole board should have the same type of relationship with the CEO ̶ a balance between being supportive and asking probing questions relating to the logic underlying strategic decisions, and how the organisational dynamics are playing out.

Directors, in general, need to have the courage to ask tough questions and also to get their hands dirty when a crisis needs to be managed.

In the main, directors must be committed to the company and what it needs. It follows that they must demonstrate a high level of commitment to the organisation’s performance, and this will naturally spill over into their engagement with the CEO who, above all, is responsible for performance in all its facets.

The leading executive search firm Russell Reynolds puts it well: “Directors bring a spirit of energetic teamwork to all interactions with the CEO.”

Points for the CEO to consider
Of course, any relationship is mutual, and CEOs would be well advised to put a great deal of thought and care into how they, in turn, build a solid working relationship with the board and its chair.

One of the keys to the board-CEO relationship is overcoming the inevitable asymmetry in knowledge ̶ the CEO will always be much better informed than the board about the company’s inner workings. Good CEOs will work hard to give the board access to the information it needs in as transparent a way as possible, and will also facilitate the building of relationships between the board and key members of the executive team.

Generally, the CEO should take the time to build relationships with individual members of the board while, at the same time, committing to board independence. The CEO will also have to learn to value ̶ and encourage ̶ the board’s mandate to challenge his or her assumptions as part of a necessary process of refining strategy and setting the company (and its CEO) up for success. CEOs should actively seek input from board members between meetings.

All this may be a tall order for most CEOs, but it will be made easier if CEOs recognise the complementary skills the various board members bring, and how they can be harnessed for the ultimate good of the company.

Bearing all this in mind, it is advisable for the CEO to be allowed to play a role in the nomination process for new board members. At the same time, he or she needs to facilitate the necessary succession planning for the CEO position.

Joint responsibilities
Both CEO and board need to understand ̶ and to discuss openly ̶ the need for a collegial relationship but yet one that is independent. This will only be achieved if both parties understand what their roles are, and this understanding is made explicit. The glue that binds all this together is all parties’ moral and contractual obligation to act in the best interests of the organisation.

Parmi Natesan and Dr Prieur du Plessis are respectively CEO and facilitator of the Institute of Directors (IoDSA); email: info@boardgovernance.co.za

Parmi Natesan		Dr Prieur du Plessis