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The Chief Executive Officers (CEOs) arguably do not enjoy dealing with their corporate
boards. However, they can proceed on all major strategic initiatives only with the board's
ratification, since the board has the responsibility to protect the interests of the shareholders and
other stakeholders. The success of a company is attached to a good strategy, and this good
strategy is seen as the sole initiative of the CEO, but the board plays a major role in supporting
these strategies and initiatives and deserves proper credit for that success. Although the board
and the CEO have broad common intereststo foster the interests of the stakeholdersyet
they usually hold divergent opinions to get there. Board and CEO (management) are usually seen
to negotiate and work through the decisions, both managing each other. The strategic issues
such as entering into a particular market, new product lines, market position, and so on are
based on forecasts and environmental scenarios, and having a position-based negotiation on
them stalls any effective action for the company. In an effort to be dutiful as directors, the
board prefers to negate any different idea of change, to the extent of having a poor relationship
with each other.However, it is the relationship between the board and the CEO that is critical
and is based on the trust and respect for each other (Furr and Furr, 2006). This is necessary
for better corporate governance practices in the company. Obviously, this trust and respect do
not manifest by itself but are painstakingly nurtured by different actions of the board members
and the CEO. This paper focuses on the CEO and suggests how the CEOs generate their share
of trust and respect, which at times gets so entrenched that it becomes a legacy for the
board to follow, thereby setting standards for corporate governance mechanisms of the company.
Conformist attitude to the `way the things happen there' in board proceedings may
not always be ideal and maybe a resistance to change. Such process is appropriate along
the changing external environment. Loyalty to the company is likely to stem from a
desirable attitude to change, rather than a `group think'. Individual board members operate within
the purview of a small population of the board, who have their own rituals, traditions and
culture. If the causal linkage is marked, more often it points towards the legacy that a strong CEO
has contributed to the board. Perhaps, the CEO is a founder member or a person who has
salvaged the company from bad times. It is the legacy that the strong CEO leaves, that becomes
the framework of values and internal corporate governance mechanisms on which the board
acts. With a set value system, it becomes much easier for the board to help the current CEO
on factors of decision trade-offs and other strategic issues. This paper is an effort to exemplify
how this legacy given by the CEO to the board gets entrenched in the company and builds
the foundation of trust and respect which is primarily essential for the board and the
management (CEO) to have in order to function
effectively. |
