How to Make Sure Your Board Sets a Good Example for Your Company

Executive Summary

CEOs are expected to articulate a compelling vision and values for the organization. Just as important, they represent the “tone at the top” that helps define and maintain a common culture across the organization. So does the board, whether its members realize it or not. How they behave in the boardroom directly affects how the CEO and senior management perceive and embody their roles. Board behavior includes everything from the way it conducts meetings to the quality and character of its discourse to the frequency and honesty of its self-assessments of effectiveness. Ideally, the board will establish an even higher-level tone at the top for the CEO and senior management to model in their conduct of business.

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CEOs are expected to articulate a compelling vision and values for the organization. Just as important, they represent the “tone at the top” that helps define and maintain a common culture across the organization. So does the board, whether its members realize it or not. How they behave in the boardroom directly affects how the CEO and senior management perceive and embody their roles. Board behavior includes everything from the way it conducts meetings to the quality and character of its discourse to the frequency and honesty of its self-assessments of effectiveness. Ideally, the board will establish an even higher-level tone at the top for the CEO and senior management to model in their conduct of business.

For example, if board meetings habitually start late and end late, management will likely model similar behavior on the job, day in and day out. If the board engages in debate that devolves into demeaning or derogatory comments, personal attacks, table-pounding, or the like, management will take note and likely mimic that behavior inside the organization. If the board avoids addressing the lack of diversity in its composition, management will follow the lead and neglect diversity internally. That’s human nature. We follow the leader and, yes, CEOs have bosses, too: the board of directors.

The need for boards to proactively advance behavioral norms outside the boardroom became painfully apparent to me on one of the boards I served on a number of years ago. Pre-reading materials were typically provided to board members only one or two days before the meeting. Meetings always started at least 15 minutes late. The agenda failed to note time allocations for specific topics, which led to rambling discussions and critical issues left unaddressed. The purpose of discussion items was not clearly articulated for the board. Certain board members tended to dominate conversation and were condescending to other directors and the CEO. And no one on the board was willing to forthrightly address the situation.

As board members, we often privately blame the CEO in these circumstances but don’t do anything about it. Until we do something about it, we are doing the management and investors a disservice. Here are some simple steps boards and CEOs can take to ensure that directors and senior management are aligned behind exemplary behavior and committed to modeling it:

Share expectations, agree on principles, and put them in writing. The CEO should outline expectations of the board, and the board should outline through the chair or lead director its expectations of the CEO and senior management. This “operating agreement” should include:

  • Running well-planned, efficient, informative meetings, setting the agenda topics and time allocations with the lead director, providing pre-reading materials one week in advance, framing agenda topics with questions where board feedback and insights are desired, starting and ending on time, one person speaking at a time, and no sidebar conversations
  • Providing monthly reports on the state of the business between board meetings
  • Communicating regularly with the board — there should be no surprises — and responding rapidly to inquiries
  • Treating each other with dignity, fairness, and respect

Review these expectations annually. Remind everyone of his or her commitment and provide an opportunity to discuss areas for improvement and make adjustments.

Charge the chair or lead director with reminding board members and the CEO about their commitments. If conversations, communications, or meeting conduct veers away from expectations, whether during meetings or in interactions outside the boardroom, invoke the operating agreement.

Use annual CEO performance reviews and annual board self-assessments to evaluate progress in meeting shared expectations. Provide direct individual feedback that will encourage needed behavioral change among individual directors or the CEO.

What happened at the board described earlier? As a relatively new board member and recently appointed lead director, I followed the steps I am recommending here without fully realizing it. I initiated a frank conversation with the CEO. We jointly developed the board’s expectations of the CEO and the CEO’s expectations of the board and reviewed them with the board and senior management. The board agreed that I would take the role of maintaining adherence to the expectations and provide real time feedback when issues arose. We also bolstered the review and assessment processes to include more in-depth dialogue about advancing the culture of the board and the company. The big lesson learned was that a lot of wasted time and unnecessary trouble could have been avoided if the board had acted more quickly.

Providing comprehensive oversight for the advancement of the enterprise goes beyond the board’s explicit responsibilities — the duty of care, the duty of loyalty, the exercise of business judgment, and the hiring and firing of the CEO. It also entails an implicit obligation to model the behavior expected of the CEO and senior management. For better or worse, the board’s behavior will cascade down through the organization. Part of the board’s job is to make sure it is for the better.

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