August 26, 2010
Style, or Substance?
I had an interesting conversation the other day with a friend who sits on a couple of Boards, as do I (besides Return Path’s). We ended up in a conversation about some challenges one of his Boards is having with their CEO, and the question to some extent boiled down to this: a Board is responsible for hiring/firing the CEO and for being the guardians of shareholder value, but what does a Board do when it doesn’t like the CEO’s style?
There are lots of different kinds of CEOs and corporate cultures. Some are command-and-control, others are more open, flat, and transparent. I like to think I and Return Path are the latter, and of course my bias is that that kind of culture leads to a more successful company. But I’ve worked in environments that are the former, and, while less fun and more stressful, they can also produce very successful outcomes for shareholders and for employees as well.
So what do you do as a Board member if you don’t like the way a CEO operates, even if the company is doing well? I find myself very conflicted on the topic, and I’m glad I’ve never had to deal with it myself as an outside Board member. I certainly wouldn’t want to work in an organization again that had what I consider to be a negative, pace-setting environment, but is it the Board’s role to shape the culture of a company? Here are some specific questions, which probably fall on a spectrum:
Is it grounds for removal if you think the company could be doing better with a different style leader at the helm? Probably not.
Is it fair to expect a leader to change his or her style just because the Board doesn’t like it? Less certain, but also probably not.
Is it fair to give a warning or threaten removal if the CEO’s style begins to impact performance, say, by driving out key employees or stifling innovation? Probably.
Is it fair to give feedback and coaching? Absolutely.
This is one of those very situation-specific topics, but probably a good one for others to weigh in on. I do come back to the question of whether it is part of a Board’s role to shape the culture of a company. Is that just style…or is it substance?