{"id":416,"date":"2008-09-23T00:04:35","date_gmt":"2008-09-23T00:04:35","guid":{"rendered":"https:\/\/www.n2growth.com\/rogue-ceos-board-accountability"},"modified":"2020-10-13T00:37:40","modified_gmt":"2020-10-13T04:37:40","slug":"rogue-ceos-board-accountability","status":"publish","type":"post","link":"https:\/\/www.n2growth.com\/en_gb\/rogue-ceos-board-accountability\/","title":{"rendered":"Rogue CEOs & Board Accountability"},"content":{"rendered":"

Rogue CEOs…given the recent failure of banks and financial<\/a> institutions previously thought to be untouchable, there has been a tremendous amount of justifiable venom being spewed at the CEOs of these firms. Their ignorance, and in some cases their arrogance<\/a>, allowed these rogue CEOs to operate outside of normal business rules, conduct self-serving agendas, and partake in self-dealing transactions all while receiving outrageous compensation.<\/p>\n

Before I go any further, let me state that I believe we should understand that the overwhelming majority of CEOs operate within the bounds of reason and ethics consistently placing stakeholder interests ahead of their own. The real question we should be asking is where were the boards of directors during this period of mismanagement?<\/p>\n

You see it is the board that is responsible for holding the chief executive accountable. Even where you have a CEO who is inclined to misbehave, an actively engaged board of directors simply won’t allow it to happen. In today’s post, I’ll examine the role of the board of directors in keeping CEOs accountable…<\/h2>\n

Before I proceed further, and\u00a0for contextual purposes, I believe it\u2019s important to\u00a0actually define the role of the board of directors. While there are certainly a variety of opinions as to the roles and\u00a0obligations of\u00a0a company\u2019s board of directors, from my perspective they can all be boiled down into\u00a0four simple responsibilities:<\/p>\n

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  1. Shareholder Accountability<\/strong>: A board member\u2019s primary responsibility is to act in good faith as a fiduciary in representing the long-term best interests of shareholders. A board\u2019s actions and decisions must be able to pass the litmus test of public scrutiny (legally, morally, and ethically), rise above personal agendas, and always place shareholder interests above all else;<\/li>\n
  2. Corporate Governance<\/strong>: A board must ensure that the corporation\u2019s charter and by-laws are adhered to. Moreover, a board must use its best efforts to hold executives accountable for ensuring that corporate actions fall within other legal, financial, regulatory, and compliance boundaries. Ignorance and apathy are not the traits of a good board. Great board members are proactive, involved, supportive, consultative, experienced, and savvy. They know the rules, play between the lines, and do the right things.<\/li>\n
  3. CEO Oversight<\/strong>: It is the board\u2019s job to select the CEO, provide the CEO with support and guidance, and to hold the CEO accountable. Good boards exercise great care and prudence in profiling CEO candidates, recruiting the right CEO for the job, providing the CEO with a clear job description, successfully onboarding the CEO, and holding the CEO accountable for meeting a set of clearly defined expectations. Good boards do not attempt to micro-manage a CEO, rather they understand their highest value in being a value-added resource for the CEO focused on helping the CEO become successful.<\/li>\n
  4. External Visibility<\/strong>: A key responsibility of the board is to serve as an external champion of the corporate brand. Board members should have a clear understanding of the corporate vision and mission, and where prudent, evangelize the message for the benefit of the corporation. Whether this requires providing networking assistance, investor relations support or engaging the media, a highly regarded and active board can add substantial value to the enterprise.<\/li>\n<\/ol>\n

    In the text that follows I\u2019ll offer\u00a0several points that will help\u00a0a board\u00a0evaluate whether or not\u00a0they have the right CEO for the job:<\/p>\n