To Carey Oven, the relationship between a private company board and its CEO isn’t always one of total agreement. Nor is it defined by conflict. It is, in fact, a healthy mix of those two extremes.
“The board/CEO relationship — by design — is one of alignment, but also one of constructive, healthy tension,” says Oven, national managing partner for Deloitte’s Center for Board Effectiveness. “The board, in the authority of its fiduciary, delegates its responsibility to the CEO to run the company. The relationship between the board and the CEO should be one of mutual success for the organization: the board supports the CEO and oversees the CEO.”
According to Oven, the connection between boards and CEOs is dynamic but generally aligned as shown in the results of a pair of recent surveys. According to the Winter 2023 Fortune/Deloitte CEO Survey, the three issues most on CEOs’ minds are inflation (with 61% of CEO respondents naming it as an external issue they expect to influence or disrupt their business strategy within the next 12 months), geopolitical instability (51%) and labor skills shortage (48%). Following those three are “other sources of financial/market instability” at 44% and supply chain disruption at 27%. For comparison, the 2022 NACD Private Company Board Practices and Oversight Survey found that the top issues on the directors’ agendas are increased competition for talent, growing inflation and rising geopolitical volatility. Same items, different order, which Oven takes as a signal of a healthy relationship.
“The board and management leaning in constructively together on issues — with management leading the organization and with the board providing oversight to management — makes for an effective board/CEO relationship.”
Oven stresses the importance of establishing a governance framework so both the board and management can be clear on each other’s roles and responsibilities and ensure a smoother process when it comes to critical decision-making.
“The board and management should consider all the aspects around the major issues and make sure they have the skills, process, information and behaviors to understand how they navigate such issues. On some matters, the board may need to lean in more directly, and on others, the board can be ‘noses in, fingers out’ and allow management to run the company with board oversight. The relationship between the board and the CEO can be very dynamic.”