Why Does the Board-CEO Relationship So Often Go “Off the Rails”?

STRIVE! a leading Canadian Board Governance Company, has identified several key reasons why this trend is growing- and may continue to do so.

The major causes are:

• Lack of role clarity – neither Board nor CEO have defined responsibilities.
• Board and Committee members constantly interfering in operations; no governance policy.
• Board members do not understand their roles and lack confidence.
• Hidden or political agendas of Board members.
• Poor communication skills on both sides leads to conflict.
• Too many egos in play-everyone wants to be in charge.
• Board members do not have the skills to run a major enterprise.
• Board not sure how to deal with poor CEO performance; lack of effective review structure.

STRIVE! highlights how the consequences of Board-CEO conflict can be significant and far-reaching:

• The best people - whether Board or senior management leave. Replacement costs are significant.
• There is a considerable loss of vision, focus and collective action to achieve these.
• Enormous energy is expended on in-fighting and territorial protection.
• Productivity, profitability and shareholder/stakeholder value all decline.

Suggestions for improvement are simple on the surface, but hard to achieve:

• Define roles, responsibilities and accountabilities right up front.
• Develop and implement clear policies and processes for both governance and management.
• Learn how to conduct appropriate performance reviews and carry them out rigorously – both for the Board and the CEO.
• Develop informal feedback sessions where challenges and frustrations can be worked out.
• Invest time in trust building/team building sessions.
• Hire and appoint well and in accordance with corporate culture.
• Model and implement a continuous improvement mind-set.