Striking The Right Balance

#Entrepreneur

I was talking recently to a friend who advises a lot of boards. I asked him his view on boards overall.

He said that he saw two styles, both of which he found problematic.

The first style is the “rubber stamp board” that does whatever the CEO asks of them.

The second style is the “meddling board” that acts like it is running the business.

He told me he sees very few boards that manage to strike the right balance.

I sit on a lot of boards and have been doing so for thirty years now. I have been on rubber stamp boards and I have been on meddling boards. And I agree that both are problematic.

What I have learned over the years from those not great experiences is that boards must respect the line between governance and management and never cross it. But they also must govern. They must push back on things that don’t make sense and they must exercise the authority that has been vested in them by the shareholders.

This need to strike the right balance exists in many other contexts in our lives. It is the essence of good parenting. It is the essence of good management.

To a large extent boards reflect the CEOs that report to them. Strong willed successful CEOs can often construct rubber stamp boards because that is what they want. And weak ineffective CEOs find themselves with meddling boards who are trying to manage the poorly managed company from above.

Neither of these situations is good. The weak and ineffective CEO should be replaced by the board instead of trying to manage from above.

And the strong willed CEO must have checks and balances placed on them, no matter how well they are doing.

A great board chair can be transformative for a board. They can stop the meddling and force the necessary management changes. And they can stand up to a strong willed CEO and build the trust and respect that can lead to a well functioning board.

This is why I do not believe that CEOs should chair their boards. They should find someone who has a lot of board experience, knows how to strike the right balance, and vest in them the authority to lead the board to the right place.

I have been on boards that do strike the right balance and are chaired properly. It is a pleasure to work on these boards and a well functioning board is a thing of beauty. Every CEO should want one.