David Livingstone said that, “I’ll go anywhere as long as it’s forward.”
The word “forward” implies progress and action, but in our world, it may not translate to accretive value. Leaders are challenged and held accountable for determining a confident path, communicating direction, and aligning resources with action. That’s where the “qualities” of a CEO are the deciding factor.
Too often, Boards and their CEOs are caught at the crossroads between “speed to change” and “managing scale to value.” We call this, “two cats in the bag.”
Although intertwined, it’s challenging for Boards and their CEOs, as each requires a rather unique and somewhat opposite set of leadership qualities… leading/governing change at an accelerating pace… while managing scale and entrenched culture of organizational activity.
In fact, in this era of activist shareholders, this dilemma creates an arbitrage opportunity for these shareholders to gain influence and leverage. And, many times, Boards are surprised when this arbitrage occurs (not uncommon in a world of black swans) or when activists come knocking. It’s a safe bet that no company, its Board, or any CEO are immune or insulated.
Perhaps Michelangelo’s comment sums it up, “The greatest danger for most of us is not that we aim too high and miss. Instead, we aim too low and reach it.”
Most Boards of Directors strictly observe the line between governance and company leadership. In too many instances this becomes an excuse for inaction, owing to risk aversion, i.e., shooting too low on responsibility and continually “going along to get along.”
The Boards that we advise appreciate that it is a necessity of governance to dig deep and understand the value platforms of the company that they govern. Accordingly, our clients are gearing up to deal with shareholder influence in a variety of ways, including viewing their role as “activists inside.” This includes matters such as enhanced shareholder and stakeholder communication, as well as broader considerations of unlocking value via operating and balance sheet moves.
Being an “activist board” by definition requires clarifying, if not redefining, the performance expectations of their CEO. And, this translates to viewing CEO performance under the microscope. One thing for sure, CEOs are more effective if they truly understand Board expectations in conjunction with their organization’s alignment to perform. Preferred outcomes are not achieved without an ability to execute.
We have observed that successful Boards have an ongoing, open, and honest relationship with their CEOs, recognizing that not every leader is ‘right” to lead in every circumstance. Boards owe the shareholders, and those pressing for change, this type of a deep-dive leadership evaluation. Considering and evaluating CEO succession candidates, inside and outside, must be an ongoing responsibility of Boards and their CEOs.
There is no substitute for Boards and their CEOs being responsible for selecting and retaining talented leadership teams. Keep in mind that this isn’t a static, once-a-year update. Success requires continual vigilance. Knee-jerk reactions to leadership upgrades rarely win out.
To avoid the traps of governance and leadership blind spots, we recommend:
CEOs, park your ego and be a steward of your shareholders. And, yes, likely, you will move on at some point. It’s the nature of providing relevant leadership.
Boards, keep your nose in but fingers out. Maintain clear lines. Work diligently to keep communication open and transparent between the Board and its shareholders, and equally as important, between Directors and the CEO.
It all sounds so simple, doesn’t it?
Yet, surprisingly, few Boards and their CEOs do it well.