The board-chief executive relationship

What sort of relationship is required?

A board has a huge stake in its chief executive being successful.

The board-chief executive relationship is full of inherent contradictions. The chief executive is usually a full-time professional employed by part-timers who are mostly amateurs in the operations of the business being governed. That brings special challenges. The chief executive controls operations, including the information necessary for the board to make its governance decisions, yet the board carries ultimate accountability for these decisions. The chief executive is expected to provide leadership to the organisation and, at times, to the board. Yet the board is the ultimate leadership body. In short, it depends on the chief executive to make things happen, but the chief executive’s only authority is granted by the board.

These contradictions can only be resolved when the board and chief executive work as a team – partners and colleagues working together. Some directors and chief executives find this difficult to accept.

Key elements in a successful relationship

1. Role clarity

Role clarity is an essential starting point for an effective organisational relationship. It is vital that the directors and chief executive understand and respect each other’s role and responsibilities, that they understand the difference between governing and managing, and support each other.

2. Mutual expectations must be explicit and realistic

Undeclared expectations and untested assumptions will impede any relationship – personal or organisational. The board should detail what it expects of its chief executive and the chief executive should make clear what they expect of their board. Ideally, these should be documented, and reviewed regularly.

A list of director expectations of the chief executive would likely include:

the achievement of desired results;
loyalty;
respect for the experience, independence and wisdom of directors;
honesty and openness;
assistance with strategic and other board-level thinking;
to be treated as a collective group, not singled out and set against each other;
to be told what a governing board needs to know in order to meet its duty of care obligations;
to be kept abreast of critical strategic issues and events that could impact on the organisation’s ability to achieve its desired results; and
to feel proud of their association with the board and the organisation.

A list of chief executive expectations of their board would likely include:

clearly stated outcomes to be delivered;
clearly defined boundaries of authority;
that the board speaks with one consistent voice;
to be allowed to manage, free from undue interference by the board or individual directors;
to be given support for worthy effort;
recognition for achievement and the occasional thank you;
honesty and openness;
the availability of directors’ wisdom and advice, and a sounding board when requested;
a genuine commitment to the organisation and an honest effort to understand the business and its issues;
thorough pre-meeting preparation and attendance at meetings and workshops;
regular, honest performance feedback; and
teamwork, partnership and a sense of common purpose.

3. Reporting and information requirements

Directors need to clarify exactly what information they require, in what form, about which issues and when. No chief executive should be left to guess their board’s information needs. Provided the board’s interests, requirements and strategic priorities are clear, a smart chief executive can anticipate the need for certain information and provide this without needing to be asked.

4. A fair and ethical process for chief executive performance management

The chief executive has a right to expect the board to provide regular performance feedback against agreed performance expectations. The board’s policies and the chief executive’s performance agreement provide the basis for this feedback. Feedback should be continuous and timely rather than occasional.

5. The chief executive-chair relationship

Most directors and chief executives benefit from the chief executive having a sound working relationship with the chair. This relationship should not, however, be at the expense of the chief executive’s relationship with the full board.

6. The chief executive’s role at board meetings

Chief executives must be clear that board meetings are for board business, not a management forum. Without guidance or input from the board, a chief executive might be inclined to stack the agenda with matters of importance to them, rather than focusing on what the board needs to do its job.

The chief executive has two primary roles at board meetings:

helping the board understand and address the future by providing advice and support to the board’s dialogue and decision making; and
helping the board analyse and understand the past and providing evidence that everything within the organisation is as it ought to be.

7. Helping the board understand the risks faced by the organisation

The board needs to be regularly informed about the nature of organisational risks and the planned response. A chief executive can help the board fulfil its duty of care by developing risk mitigation strategies and promptly reporting key issues. Many boards have developed a risk register, charging the chief executive with ensuring this is kept up to date. The Audit and Risk Committee commonly uses the register as the basis for its overview of organisational risk, regularly reviewing the operational response to the risk profile, auditing risk mitigation strategies and activities, and advising the board about significant risk matters and related policies.

A sample risk register is included in the online resources.