Under pressure: Maintaining a strong board/CEO relationship

As many boardroom leaders know from experience, achieving that “healthy tension” in the boardroom—where the board is advising the CEO and management team while maintaining objectivity, independence, and skepticism—isn’t easy. It’s also clear that striking that critical balance will only become more challenging and more important given the mounting complexity of the business environment and the tremendous pressure on boards and CEOs to deliver results.

Rapid technological change and business model disruption, COVID-19 and threat of a deep recession, geopolitical uncertainty, and investor demands to hold CEOs and boards more accountable for performance all place possible strains on the board/CEO relationship. As the authors of “The CEO Life Cycle” note, this intensifying external pressure “raises the odds of adversarial dynamics between CEOs and directors, leaving many CEOs feeling unsupported and misunderstood.”¹

As our interviews made clear, the pressures on the CEO and board are likely to intensify—particularly with COVID-19 and a recession complicating an already challenging business environment—making a healthy relationship between the board and CEO even more important. Emphasizing the importance of working with the CEO and the board to develop and maintain a healthy board/CEO relationship, the lead directors we spoke with collectively highlighted key areas of focus for lead directors in their efforts to foster such a relationship:

• Insist on candor and transparency, which are key to building a culture of trust and confidence.
• Set clear expectations that the board’s role extends beyond compliance and monitoring, and includes ongoing engagement in strategy, exposure to the organization’s talent, and serving as a resource for the CEO and management.
• Ensure that the CEO and board agree on how the firm will be run.
• Assess whether the board’s composition and culture enable it to serve as a resource for the CEO and management.
• Insist that the CEO take the lead in driving the right relationship with the board.
• Consider how the lead director, as the point person for the independent directors, can facilitate a healthy board/CEO relationship.
   

1 James M. Citrin, Claudius A. Hildebrand, and Robert J. Stark, “The CEO Life Cycle,” Harvard Business Review, November–December 2019.