By, Stuart R. Levine
Published in, Agenda; A Financial Times Service
Communication is a simple skill. But in the corporate governance world, it’s shocking how many boards and CEOs fail to harness this seemingly intuitive trait — particularly when working together. Many corporate leaders understand that communication between the board and the CEO is critical to achieving a sustained business culture. But for those who miss this point, there’s an increased likelihood of elevated risks for business stakeholders.
Our experience has uncovered different types of communication styles, and thus resulting interactions, between CEOs and boards. The following are examples of three scenarios that are meant to be descriptive of different behaviors and their consequences.
Example 1
A new CEO is elected. The chief executive then commits to a conversation prior to every board meeting with each director to help understand how the board wants to receive information and what their data needs are. These meetings and conversations occur after the board books have been distributed so that directors have a context for questions that arise after digesting the materials. No issues are off the table, and the dialogue is open and direct and strengthens the effectiveness of the board meeting. Surprises are eliminated through this advanced board dialogue. The CEO has the opportunity to discuss concerns and gather input that is beneficial to them. Recognizing that this approach puts time pressure on both the CEO and each director, everyone approaches these conversations seriously and is prepared.
Example 2
A new CEO inherits a board culture that is dysfunctional. Instead of regularly speaking to directors prior to the board meetings, he avoids contact with most members. This creates a knowledge gap in the eyes of the board regarding results, and many questions remain, which inhibits the creation of a more unified board culture. No CEO or director likes to make assumptions that they know what’s going on within a company or what future products and services will look like. Emergent leadership speaks to the importance of collaboration through the sharing of data and the solicitation of ideas around the creation of innovative solutions. No one person has all the answers. The tone comes from dialogue and the best practices promoted among intelligent, engaged groups of people working towards an aligned mission.
Example 3
A new CEO working in a highly competitive industry with intense regulatory oversight does not immediately focus on developing relationships or dialogues with board members. In one-off conversations, they comment about individual directors, their lifestyles and their careers. This sets a basis for disruptive behavior instead of establishing a foundation for the coherent sharing of information in a trusting way. As a best practice, the CEO should focus on helping directors understand key regulatory and business trends that the company is facing. But due to poor communication, the CEO misses an opportunity to foster such education and build trusting dialogue with board members.
Smart and effective boards understand the need for open communication with CEOs. Chief executives, particularly the new ones, have a serious responsibility to develop high-level relationships with board members through communication that creates a rhythm and is predictable. Not every meeting has to be in person with individual directors. However, executives should be consistently initiating conversations that give directors insight into sensitive issues. We owe it to the shareholders and employees to have disciplined and routine conversations between the board and CEO to help elevate this dialogue.