The CEO and the board have a unique relationship. The CEO is typically a member of the board, but they also serve at the pleasure of the board. As a CEO, I was always conscious of the line between operations, which is the domain of the CEO, and strategy which is broadly speaking in the realm of the board. It is a unique relationship, almost like co-equal branches of government, but not exactly equal. Even though the CEO is typically on the board, they also work for the board, and the board has the power to hire and fire the CEO. My defenses used to go up when board members crossed the line into operations uninvited. My feeling was if they are unhappy with operations, their remedy is to replace the CEO, not do the CEO’s job for them.
An important step to create a great board is to recognize the different roles and establish a positive working relationship between the CEO, the board, and the executive team. I have observed board members who understand the co-equal nature of the CEO and board relationship, and form a collaborative working environment. There is mutual respect and an understanding that both parties are experienced professionals and have the same goals in mind. Unfortunately, I have also observed board members who project a superior, all-knowing attitude, and treat the CEO as an employee rather than a peer.
Sometimes, the nature of the relationship is determined by the investor’s model. In the venture and private equity world, some firms are control investors and require their portfolio companies to follow defined methodologies or playbooks. They set the operating procedures and are deeply involved in corporate operations. When a control investor acquires a business, it is important for the CEO to have their eyes open and understand that their degrees of freedom will be constrained. As long as the roles are clear, a healthy and productive relationship can be formed.
In contrast, when bad behavior sets in more organically, it can create a toxic environment, and the CEO will start to dread board meetings. This is usually the result of one or more board members adopting that superior attitude and creating antagonistic meetings.
Antagonistic board meetings lead to all sorts of bad behaviors. The meetings evolve into performative recitations of metrics (aka Dog and Pony shows). The CEO starts to focus on feel-good metrics that paint rosy pictures in order to curry board approval. They also tend to avoid bringing controversial topics to the board until they can no longer avoid them, which is usually too late to address them. There is typically a reluctance to bring members of the executive team to board meetings in an effort to shield them from bad board behavior. Worst of all, CEOs leave the meetings feeling beat up and demoralized, rather than encouraged and energized.
When a positive board and CEO relationship develops, there are many more opportunities for board members to become engaged and helpful. With a well curated board composition, each member is expected to contribute their skills to the mix. This is when the divide between the board role and the CEO’s operating role can blur in a positive manner. At the request of the CEO, I have often been asked to engage with members of executive teams to help them evolve into the leaders the CEO needs. When I was an operating CEO with a strong board, I did the same. The important point is to recognize that this type of involvement has to be at the request of the CEO, and the help offered must be consistent with the CEO’s operational direction.
One last ‘friendly’ reminder about the CEO / Board divide. The working relationship between board members and the CEO can be a beautiful thing. I often talk about a great board as a competitive weapon, and a strong bond between CEO and board is necessary in order for this to evolve. However, as the CEO, remember that you are sitting in the middle between the people who work for you and the board of directors you serve and essentially work for. A CEO can be friendly with both, but a wise advisor once reminded me not to confuse friendship with business. Friendship only goes so far in a business relationship. In particular, the board’s duty is to the shareholders and not to their CEO friend. If operations are going poorly, the CEO owns the problems, and the board’s job is ultimately to hold the CEO accountable.