The Chair-CEO relationship: how close should it be?

In terms of working relationships, there are none more important and potentially ambiguous than that between the Board Chair and the company CEO.

Although a complex relationship, it is key to the successful functioning of the Board and the executive. However, the relationship often becomes too comfortable or not close enough.

In either of these cases, the result is a lack of accountability that can lead to crisis.

Governance by Design works with Boards and executive teams where there is a breakdown in this important relationship. This blog covers two scenarios.

When the Chair and CEO are too close

It’s essential that the Chair and CEO get along however when the relationship tips over into friendship territory or involves blind trust, accountability suffers.

One example was a case in which a Board found their organisation at risk after allegations of financial mismanagement came to light. The resulting investigative process unveiled a CEO who had not been held accountable or questioned for decisions with a perceived conflict of interest and in fact, had been allowed to maintain those interests with full knowledge of the Chair and Board.

In this case, the Chair had a friendly relationship with the CEO, and a personal connection outside of the organisation, rather than a close working relationship, and there was a lack of accountability as a result.

When the Chair and CEO are not close enough

In another example, a Board found itself in crisis when a key partner of the organisation announced its intention to sever ties.

What came as a shock announcement that blindsided directors led to an investigation that uncovered serious allegations against the CEO and revelations that ultimately saw the dismissal of staff and the organisation put at financial, reputational and operational risk.

The Board was blind to information regarding decisions being made by the CEO and the resulting organisational culture because of a lack of questioning and oversight of the CEO and quality reporting to the Board.

Getting the relationship right

In the past the Chair was regarded as more a mentor to the CEO as Chairs typically had more industry experience than the CEO.

There has been a shift in that equation though as comparatively CEOs now have more industry experience themselves, and the Chair-CEO relationship needs to be approached differently.

The Chair is now regarded as more like a confidant to the CEO, and a conduit between the CEO and the Board.

His or her role is to test and challenge the CEO and hold them accountable in-between Board meetings. The Chair is accountable to the Board in this regard and should be updating and reporting on executive performance to the Board since they last met.

Often though, the Board itself fails to challenge the Chair on this, for three reasons:

• there’s too much trust;
• there’s an assumption they would be told what they need to know;
• there’s too much deference to the Chair position.

The Chair is first among equals on the Board – they have no more power or authority than any other director, and so it is up to all directors to question the Chair on the CEO’s performance.

The Chair and CEO are supposed to be in contact on a regular basis, and a director at a Board meeting who isn’t priivy to those discussions, should want to know what is being discussed.

How to keep the relationship on track

The primary way of ensuring the Chair-CEO relationship is operating as it should is to introduce in-camera session to the Board meeting agenda.

These in-camera sessions are the only opportunity a Board has to discuss executive performance in an open manner.

Board’s sometimes avoid them on the belief the CEO or executive will feel defensive or uneasy about them, but if they are a regular agenda item, it sets the expectation they will occur as normal meeting process.

Such sessions should include questions such as:

• Has anything occurred between Board meetings, that’s come up in discussion between the Chair and CEO?
• Are there any areas of discussion the Chair felt uncomfortable about?
• Are there any performance areas of concern?
• Have we received enough background to inform the papers to discuss?

A good Chair will then invite the CEO back in to the room to provide a desensitised update on what has been discussed.

Open and accountable communication is the bedrock of a Board’s ability to function successfully, and that includes the special Chair-CEO relationship.