Fostering a productive working relationship with the board of directors is one of the most important jobs a CEO has. Here are six strategies that can help promote CEO-board harmony
Don Wilkinson says in his 25 years in the accounting and professional services industry, he’s noticed an important evolution in how CEOs relate to their company’s board of directors. “When I got into the business, I would say the relationship between the CEO and the board was that they were usually buddies and it was a much more informal process back then,” says Wilkinson, Deloitte’s vicechair and an expert on corporate governance. “I do believe governance has become more professional. I think we are starting to get to the next stage and CEOs and management are starting to better understand the role of the board and are making better efforts to work together.”
But as boards become more independent and professional, and less stocked with a CEO’s cronies, it presents a challenge for senior management. How can they foster an effective working relationship with a group of people whose duty is to look out for shareholders and employee interests and to assess, and often challenge, the CEO’s decision-making?
Fortunately for CEOs who are asking that question, we quizzed some corporate governance experts and picked their brains for insight on the issue. What follows are six strategies they suggest chief executives need to use to ensure their relationship with their company’s directors goes as smoothly as possible.
You can thank us later.
Get cozy with the chair One strategy to use to get the CEO-board relationship right is for the CEO to foster a relationship with the board’s chair where there is a heaping helping of trust and respect between both people. If you establish a good relationship with the board chair, chances are you will have a good relationship with the rest of the board. Deloitte’s Wilkinson says in certain instances, the chair can serve as a mentor to a new CEO depending on his or her experience in the industry.
The chair can also be an important buffer between the CEO and the board, providing the CEO with insight into what concerns or issues board members might have about the company’s direction and how best to respond to them. CEOs who don’t cultivate a close working relationship with the board chair do so at their peril. “There needs to be strong collaboration,” says Claude Francoeur, EY Canada’s Saint John office and advisory services leader. “The boards I have seen work the best have had a close working relationship between the board chair and the CEO in managing that dynamic with the board.”
Mind the other members Once the CEO has developed a good working relationship with the board chair, he or she can’t stop there. Corporate governance experts agree it’s critical for CEOs to get to know each board member personally and understand their drivers and passions. Don Clow, president and CEO of New Glasgow, Nova Scotiabased property management firm Crombie REIT, says he structures time to meet one-on-one with individual board members. “People are busy and in our case [the board members] live all over Canada, so it’s not easy,” Clow says. “You have to be very purposeful to plan those one-on-ones and we do that.”
Jo Mark Zurel, chair of Newfoundland Power Inc.’s board of directors and a director on eight other boards, agrees that a CEO must take the time to get to know individual board members outside of formal settings. “If the board members and the senior management team get to know each other outside meetings, there are two very positive results,” Zurel wrote in an emailed response. “Firstly, they will be more comfortable discussing sensitive issues at board meetings, and secondly, board members learn about the business during these interactions, and become better qualified to add value to the organization.”
Don’t be a control freak Modern-day board members expect openness and transparency from the CEO and the rest of upper management. If they don’t get it, they can lose confidence in the CEO pretty quickly. EY’s Francoeur says one big mistake some CEOs make is trying to manage the board too much. They try to control what information is going to the board and even attempt to restrict the board’s access to other key members of senior management. Francoeur says that’s a big no-no. “There is certainly an element of management to keep the board focused on information that is pertinent and helps them execute their role,” Francoeur says. “But in some cases you see some CEOs try to over-manage the board and they may not be as comfortable in having candid, open and transparent communication. That’s something they have to avoid.”
Hit the refresh button CEOs are busy people with intense work schedules. As a result, they can fall into the trap of assuming board members know more than they actually do and don’t realize directors aren’t as intimately aware of every transaction as management is. CEOs need to be mindful of that and continually re-introduce key topics and business strategies during board meetings to ensure directors have the appropriate understanding and alignment of what you are trying to do before introducing something new. Fail to do this task and that “something new” could raise the hackles of your board, and damage your relationship with your directors. “It’s critical for the board to be involved not just in approving business strategy, but really seeking to understand it,” Francoeur says. “It’s the CEO’s job to make sure he or she provides sufficient information and refresh and has the structure to hold that discussion and bring back proposed transactions.”
Don’t take it personally Leaders are used to being in charge and giving direction. But if they are running a business, especially one that is publicly traded, they also need to be able to listen to constructive criticism and become comfortable with being challenged by board members. Directors have an obligation to do that, and the relationship between the CEO and the directors will be enhanced if the CEO encourages healthy debate rather than simply tolerating it. “Boards are meant to be exploratory and provide some debate. It’s not all about knocking heads,” Deloitte’s Wilkinson says. “The CEO needs to be fully aware of that and be open and not defensive.”
That doesn’t come naturally to everyone, of course. Crombie REIT’s Clow says before he joined the company five years ago he worked for a private firm that didn’t have a true board of directors. He admits it’s been an adjustment for him dealing with all the questions the board asks him. But he says encouraging open and frank discussions with the board produces better advice from them and ultimately results in the company making better decisions. “Our view has always been that the best outcomes come from brutal honesty and robust creative abrasion,” Clow says. “I think healthy debate and intelligent input only comes when people are vigorous in their conversation. We encourage it and set up ground rules for it. I think it’s proven itself over many years that it does achieve better outcomes.”
Honesty is the best policy What is the worst thing a CEO can do to lose a board’s confidence in his or her leadership? Zurel has no trouble answering that question. “Lie,” he wrote in an emailed response. “The board has to be able to rely on the integrity of the CEO.”
It might seem like a pretty easy rule to follow, but not every CEO does. And when CEOs purposely withhold important details about the day-today operations of the business and boards discover the CEO has done this, it can damage the relationship so much that the business can become paralyzed.
Clow agrees with Zurel that being honest speaks to a CEO’s integrity, and he or she can’t afford to have that integrity questioned by the company’s directors. “I think people like to see clear, concise and smart answers that show good judgment, but most importantly truthful answers,” Clow says. “The board is only interacting with management on an infrequent basis. It’s not daily interaction, so they have to have a high level of confidence in the ethics and the judgment of the management team involved in order to have confidence that the day-to-day treatment of all stakeholders, employees and customers or investors are of the highest level.”