CEOs must be strong communicators to succeed in their role. When this veers towards a dominant style, unhealthy board dynamics ensue. Add a weak Chair to the mix, and the stage is set for an ineffectual board and governance risks. At worst, objective oversight is so weakened that the board is rendered a committee driven by the executive, which defeats its purpose.
CEO dominance takes many forms. For example, control of the board’s agenda to steer suboptimal strategy, or divert attention from internal checks and balances and the story they tell. It could be CEO aggression of the Fred Goodwin mould which scares off scrutiny and challenge. Then there is the expansive CEO who sucks all the energy from board proceedings, crowding out more effective focus, particularly in smaller firms where leadership skills may be less honed than in the corporate world.
This makes it all the more important for the Chair to orchestrate proceedings.
Some leaders are born great. Some achieve greatness, and some have greatness thrust upon them
Unfortunately, some Chairs may also fall short of greatness allowing commercial, regulatory and reputational risk to fester.
It may be to lack the force of personality to counter a headstrong CEO, and the character to call out executives’ ethical deviations. Credit Suisse and RICS spring to mind. Or the Chair may have a compromised or partial view of the operating context and strategic trajectory, such that Board priorities critically mismatch stakeholder expectations. Vodafone may serve as an example here.
What about the non-executives?
Boards often describe themselves as collegiate, suggesting a certain courtesy in how they work together as board colleagues. However, weak boards may in effect prioritise not being seen to rock the collegiate boat, which poses a risk to good governance.
From the Chair’s viewpoint, seeking collegiate fit helps to explain a conservative more-of-the-same approach with non-executive appointments, where fit trumps cognitive diversity despite the enhanced perspective the latter brings. From the non-executive viewpoint, there may be personal risk in pushing back on a myopic Chair, particularly as a lone voice on a board whose collective heads will not rise above the parapet. And if non-executives are insufficiently curious to spot lead indicators of irregularity - or too over-boarded and over-stretched to care – the governance risks will shoot up.
Governance can be weak even when financial probity is strong
Financial expertise underlies effective board composition; Chairs, CEOs and non-executives often originate from finance roles and the financial sector. For all boards – and especially when strong representation of finance expertise overshadows other competencies – it’s worth noting that limitations in strategic oversight can augur financial risk today, and bottom line impact tomorrow.
Michele Gorgodian is a non-executive director, and founder of Integra which delivers executive coaching and change consulting to corporate clients