“Board doesn’t run the company, the CEO runs the company”

You can’t pick up a paper or read financial news on the internet without coming across a story of corporate boards in chaos. For example, Starboard Value LP launched a proxy fight to remove the entire board of Yahoo including Chief Executive Marissa Mayer. Rockefeller Family Fund divested itself from Exxon Mobile catching the board of Exxon by surprise. In retail, Sears management and Board sat back and ignored the competition making little or no effort at innovation while Walmart with the approval of the Board is implementing a massive turnaround plan.

At the Center we recognize that board performance and board governance are under a microscope. From shareholders to government regulators things are changing for boards at record pace. That being said, board members cannot just sit back, go to meetings and answer “All those in favor say aye” by simply raising their hands. Recently one of my colleagues at the Center spent time with a prominent board member of a Fortune 500 company. This was his impression. The board member did not know the names of the key managers within the Company. Over the course of two years he had never once broken bread with the CEO let alone with the other Directors. His attitude was that the board doesn’t run the company, the CEO runs the company. The obvious disconnect was that as a board member his responsibility is to help and direct the CEO and the senior management team wherever possible. With the livelihood of the employees of the company and of course the shareholders of that company depending on not only a blue chip CEO and management team but also an engaged board, the board member’s attitude is complacent at best and derelict at worst.

Stay tuned for further issues and challenges facing boards today and why you should think about getting a seat at the table.

Walt Sarkees CBA