Every time a chief executive is publicly accused of misconduct, the same question follows – where was the board? By Herman Visagie.
Hiring and managing the chief executive is one of the most important jobs a board does. Everyone nods along to that. Then some boards quietly narrow it down to performance (KPIs, targets, the annual review) and CEO conduct gets pushed to the margins, treated as somebody else’s department.
When that happens, it is a real risk. How a CEO behaves, and how the board handles that behaviour, sets the tone for the whole organisation. When organisational culture and trust is eroded, no run of good quarterly results buys that back.
This is a hard task and directors don’t get enough credit for how hard. They aren’t in the building every day. Most of the ongoing work of managing a CEO falls to the chair and someone new to the role may have no training or experience of reading conduct or culture from arm’s length.
“Managing senior people is difficult, full stop.
And managing senior people is difficult, full stop. Plenty of capable executives, CEOs among them, struggle to manage the strong-willed senior people who report to them. That problem doesn’t dissolve the moment someone becomes a director. A board seat doesn’t come with a hidden reserve of people skills you didn’t have before. It just adds distance, and higher stakes.
The easy cases are easy. Intentional illegal activity or a CEO deliberately misleading the board: Nobody needs help figuring out what to do about that. The real test is everything short of it.
A CEO delivering strong numbers while acting outside the organisation’s values. Allegations of bullying or harassment that haven’t been tested. This is where boards get stuck, and I don’t blame them for it.
Herman Visagie.
Push too hard on an unproven allegation and you can wreck a working relationship with a CEO you still need. Do nothing and the risk compounds quietly until the day something worse surfaces and it looks like the board knew all along and sat on its hands.
Boards know how to prepare for a crisis they hope never happens. Cyber incidents get simulated. Disaster recovery plans get rehearsed.
CEO conduct issues deserve the same discipline. Boards should decide who investigates, what threshold triggers a need for external advice, and when an allegation should be escalated to the full board.
Preparation will pay off when a complaint lands and someone has to make decisions under pressure, with a reporter potentially already on the phone.
“Chairs must be prepared to speak frankly with a CEO…
Chairs must be prepared to speak frankly with a CEO. A chair who can’t have a direct, uncomfortable conversation with the CEO about conduct has a bigger problem than the conduct itself – their relationship isn’t working and that creates risk for the organisation.
The chair-CEO relationship tends to fail in one of two ways. It can turn adversarial, which is its own problem. More often it swings the other way – the chair gets too close to the CEO, hard conversations get avoided and when another director raises a concern, it gets quietly minimised.
That second failure is the more dangerous one because it looks like harmony right up until it isn’t. A board’s duty is to act in the organisation’s best interests, not to protect an individual executive, and a chair who has forgotten that has stopped doing the job.
Action by the board may entail consequences beyond the CEO. Standing someone aside affects other staff, organisational performance and how the outside world reads the situation. None of that is a reason to sit still. It’s a reason to move carefully, in a way that leaves room for the board and CEO to keep working together if that’s still possible.
“It’s worth considering who is best placed to have the conversation…
It’s worth considering who is best placed to have the conversation. Usually, it starts chair to CEO, because that’s the relationship with regular engagement and it’s the easiest place to raise something difficult without it feeling like an ambush.
That doesn’t mean the chair should carry it solo or keep the rest of the board in the dark. Sometimes someone else is better placed to lead, and not because of what’s being discussed. It’s because you want someone outside the day-to-day chair-CEO relationship holding the conversation, precisely so that relationship isn’t the thing that gets damaged.
The chair of the Nominations and Remuneration Committee is often the logical choice here, since they’re already leading the work on CEO remuneration and KPIs. And sometimes the right setting is the full board, worked through as part of the regular board and CEO time rather than a side conversation.
None of this will stay inside the building. Bad conduct affects staff first, but New Zealand is small enough that word gets around long before anything reaches the media.
That alone is a reputational cost to the organisation, separate from whatever the CEO actually did. And it isn’t only the CEO’s name that gets damaged when conduct issues hit the news. I’ve had plenty of conversations over the years where someone points to a specific director, or a whole board, and says – ‘they knew, and did nothing’.
“Silence doesn’t protect a board’s reputation. It weakens it…
That’s enough on its own to make people question a director’s judgement. Silence doesn’t protect a board’s reputation. It weakens it.
Boards also need to think past the CEO conversation itself. Staff affected by the situation may need support nobody has planned for. Someone needs to think early about how all this gets communicated, inside the building and outside, if it goes public. Bringing in communications advice before the pressure hits is better than scrambling for clarity once a journalist has already called.
There’s no checklist for this and pretending otherwise is its own kind of failure. The boards that get it right aren’t the ones with the tidiest policy. They’re the ones willing to have the conversation before they’re forced to.
The ones that wait for a headline to tell them what they already knew have already failed, whatever the minutes from ‘that meeting’ say.
Herman Visagie, is the general manager of the Governance Leadership Centre at the Institute of Directors.
Feature image by Michael Fousert on Unsplash
