Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
From Rio Tinto and Novo Nordisk to Stellantis and Unilever, a stable trend of European listed companies this year has announced a sudden exit for the CEO as a tension that has leaked openly by the Board.
On paper, the board is working. In the face of geopolitical turbulence, economic volatility and technical disruption, they have previously intervened, intervened faster, and exhibited lower performance tolerance.
Korn Ferry found that half of all CEO successions last year in Europe and the Middle East were unplanned, starting from 43% last year. The most common trigger was dissatisfaction with the pace of strategy execution and performance improvements.
However, the dissatisfaction is not one-sided. “I was surprised at how much information the board lacked,” one of the newly established multinational chief executives told me recently. “Where do you have your expertise?” This is a view that top executives repeatedly reflect on their supervision. Those who provide surveillance are not necessarily equipped to provide guidance for this rapidly changing environment. In the latest scale of Spencer Stuart’s leadership survey of 2,400 CEOs and directors, less than a quarter of CEOs feel that the board is effectively supporting in today’s environment.
Historically, in Europe, the boards have been more passive. However, in recent years, more boards have changed their approach due to corporate scandals, the driving forces for specializing in executive offices, and more volatility in corporate operating conditions.
“Nose, fingers” was the traditional conference room motto. But today, veteran director and advisor Michael Monterongo says the director is “more vigilant and involved than ever.”
Directors are expected to act as strategic partners. This is expected to make judgments about emerging geopolitical risks, technology adoption and long-term opportunities. In theory this sounds good, but it is often lacking.
Sometimes it’s a matter of approach. Too many challenges by the board can be alienated. Therefore, too much good will support. Tension is essentially in the need for sufficient transparency and the board for information flow, so CEOs often want to leave it alone and can probe properly.
A survey from board intelligence based on the FTSE 100 board evaluation found that directors are often troubled by operational moments, free from innovation and unclear strategic missions. The blame is that the UK board is obsessed with risk reduction and compliance with discussing issues that could be transformative for the UK’s future. Advisor Hans Christophe Hart said:
The executive team has not been criticized. Many boards can only respond to what they are being told – and CEOs have long mastered fine art to massage the message. The board paper is skillfully curated, risks are reconstructed and language is carefully selected. If the correct question is not asked, the actual problem is clearly not noticed.
The results are increasingly built on what it looks like and the expectations of discrepancies against trust deficits, becoming increasingly fragile and dynamic, leading to more hostile interactions. Trust is easier to lose than builds, like performance.
It helps to improve the board’s knowledge base. Experience in the current environment is fast, and the learning curve can be sharp amidst technological advances and changing geopolitical alliances. Work outside of meeting rooms is also important. They may grow informal relationships, engage in site visits, or even vet the evaluation of company Glassdoor employees.
Recommended
The structure of the interactions in the meeting room is also worth scrutiny. In the UK, the agenda tends to prioritize compliance and governance issues over growth and future challenges. Board Intelligence’s Pippa Begg said it focuses on backward appearance indicators with its annual boardroom effectiveness assessment. “The structure, habits and customs around the timetable and agenda will get in the way of the conversation we want,” Begg said.
Research from Sam Garg, a professor of business administration at Essec Business School, found that by telling more, the CEO tries to ease doubt. But when and how they interact with the director is more important than quantity, as they can unconsciously undermine their authority
The relationship between CEO and board can create or destroy a company. One UK chair told me: “My CEO knows my job is to help him succeed, that’s the starting point.” If that’s clear, we can open more doors to the candidness and challenges needed to pilot the company during current turbulence.
anjli.raval@ft.com
