Peter Crow
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Who should be in "control"—the CEO or the Board?

12/5/2014

4 Comments

 
Power is an interesting dimension of human behaviour. It can (and often does) bring out the best and the worst in us, and in those around us. The question of where power could or should be held has been the topic of much debate—wars even—over the centuries.

In the modern corporate context, the CEO generally occupies the alpha male (queen bee) position in a company, especially in jurisdictions where the CEO and Chair roles are combined. In such cases, the board is relegated to the relatively passive position of making those decisions it has to, and to monitoring performance. Many CEOs like it this way—they are happy to hold the power and privilege that go with the position.

An increasing number of calls, in academia and practice, are starting to challenge the status quo. However, calls for the board to take responsibility and be accountable for business performance, by becoming more involved in direction setting and strategy development, may have an unintended consequence: a power struggle. Power struggles are generally negative, because they move one's attention from the overall goal (business performance) to a lesser goal (being in control).
  • How should such matters be resolved?
  • Should the CEO remain in control?
  • Should the board usurp power? 
  • Is a collegial position achievable or sustainable?

I'd value your thoughts on these important questions!
4 Comments
Alan Kennedy link
13/5/2014 16:02:42

You raise an interesting question, Peter. As far as I am concerned, a board's two most important responsibilities are the hiring and firing of the CEO and the approval and monitoring of the strategic plan.

If a board doesn't have the ability to do that, for whatever reason, what possible role does a board have? How can board members fulfill their fudiciary obligations to the corporation?

Having said that, there are many quasi-public sector corporations and agencies in Canada where government (i.e. the politicians) retain the authority to appoint and fire the CEO. This, of course, dramatically changes the role of the board.

Knowing when and how to use the authority to hire and fire the CEO is the subject of a very different discussion.

Cheers,
Alan

Reply
Peter Crow
13/5/2014 23:59:52

Dear Alan

Thank you for posting a reply, and great to hear from you again.

The two tasks you mention are important responsibilities of the board. However, I don't think they are sufficient, nor necessarily the two most important ones. If they were, and if boards did both tasks well, then many more companies would perform well, I'm sure.

If the CEO dominates affairs, then the board is, in effect, parsley on fish (Irving Steel's famous quote). If the board is dominant, then the CEO is, in effect, a puppet and that's no good either. My current research is pointing towards the idea that the board needs to have a much greater involvement in the strategic management process—thus this post to gather the views and experiences of others.

The easy answer is to say that the board and CEO need to share control. That sounds great on paper, but what does it look like in practice? The reality is somewhat messier—which takes us to the important question of how the board and the CEO should work together...

-prc.

Reply
Alan Kennedy link
17/5/2014 17:36:11

Really important research, Peter. While roles of the CEO and board are very much distinct and yet complementary, in law, you are making the observation that this is not the case in practice. Can't disagree with you on that. Certainly the proliferation in North America of director credentialing programs would suggest boards here have awakened to the issue if not yet solved it. One possible reason why the balance has not existed. I hope you keep us, your readers, posted on your findings from time to time!

Alan

Reply
Peter Crow
18/5/2014 00:57:09

Thank you Alan, my intention is to continue to share my findings as they emerge, as you ask. I will do so here and in conference papers.

Reply



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Peter Crow PhD CMInstD

Company director | Board advisor
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