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Who should be in "control"—the CEO or the Board?
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).
I'd value your thoughts on these important questions!
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!
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
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.
Alan