Case study - Tension between Chairman and Chief Executive - NEDworks LinkedIn Group Discussion
The NEDworks LinkedIn group is currently featuring the following Case Study (anonymised but based on a real-life situation)
NED Case Study
You are a non-executive director on the board of a listed company in the financial services sector. 3 years ago the Chairman and non-executive directors had been instrumental in removing the Chief Executive, a colourful, charismatic, character with a big reputation, as he had been unable to revive the company’s fortunes and had lost the confidence of both the shareholders and the regulator.
His replacement, an internal candidate, was seen as a safe pair of hands to steady the ship and implement the strategy which had been agreed by the board, to clean up the company’s operations, to the satisfaction of the regulator, and improve performance to satisfy the restless shareholders.
Unfortunately the new Chief Executive has not managed to make as much progress as either the regulator or shareholders would have wanted. The board has recently appointed a new Chairman who is keen to get the company back on track and there is clearly some tension between him and the Chief Executive.
As a non-executive director, how can you act to help resolve this situation? What is your role and what options should the board explore?
Next step is to review the business and business model. Is the business meeting the current needs of its customers? Is it using the appropriate technology? Does it have the appropriate products and services? How are commissions calculated and paid? What is the culture? This should give some clues about what the new (or current) CEO should focus on to make a change that drives improvements.
Then recruit the CEO you need for the actions you have to take.
Final step is to monitor and guide the CEO so that actions are taken as expected and plans changed to suite
As you say, it is impossible for the CEOs to succeed without clear expectations and it is the role of the NEDs to support the Chair to produce a clear strategy and objectives in line with the Vision, Mission and Values, which the CEO can then be tasked with delivering.
CEOs are often blamed for the failure of the business when it is more likely that it is a failure of the Board to provide clear direction
The issues with the regulator need to be examined by the Board to identify what they say about the strategy and delivery by the executives. The Board would seem to have been asleep at the wheel if the problems remain after 3 years. It may be that the problems with the regulator are adversely affecting market performance and, again, the Board is culpable for not getting to grips with this problem.
Overall a root and branch review of the business and its senior team would seem to be in order for the Board
It is not so clear to me that the Board has been asleep - within the 3 year period both CEO and Chair have changed. Perhaps both changes have been prompted by the Board. Maybe initially the results from the new CEO looked encouraging.
Clearly it is time for the Board to be focusing on reaffirming the purpose of the enterprise, as David suggests, and revisiting the strategy to provide the clear direction sought.
Fundamentally the Board cannot function effectively without an effective relationship between Chair and CEO. I would like to understand the problem there first.
You can join in the discussion on LinkedIn at https://www.linkedin.com/groups/87547/

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