How to Work Effectively with the CEO

By James Mitchell Jr. and Cindy Burrell

Experienced board chair James Mitchell Jr. shares advice on building rapport while maintaining accountability.

Every director knows the importance of building a relationship with the CEO so that the director’s advice and insight can add value to the success of the company. The question is how to build that relationship while maintaining independence, working in a collaborative manner and holding the CEO accountable.

I asked James Mitchell Jr. to share his insights from serving on the boards of private companies like Aegion Corporation and Fora Financial, his career at General Electric (GE) as a senior executive and institutional investor, his years as a senior advisor working with CEOs at multibillion-dollar asset management firms and his time as a director for nonprofit organizations like PartnersGlobal, a conflict resolution NGO, and Xavier University of Louisiana, one of the nation’s top HBCUs.

Cindy Burrell: Can you discuss your view of the role of a private company board chair?

James Mitchell Jr.: All parties must be clear on their respective roles. The way I look at it, the CEO’s number one role is to develop and execute on the company strategy that will drive growth and shareholder value. That means the daily business operation is the responsibility of the CEO and his or her management team. As board chair, I am responsible for general oversight as a fiduciary, approving and advising on company strategy, succession planning and working with the CEO to drive shareholder value. In addition, with companies owned by private equity (PE) firms, the chair and the other independent directors can provide a broader perspective of oversight and bring value-added, “outside-in” thinking to the CEO. That means oversight on strategy, capital allocation and growth initiatives like mergers and acquisitions, and, in general, collaborating as a true partner with the CEO.

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I think my key strengths as the board chair include listening more than talking, distilling an issue into the top two to three salient points that matter so I can advise the CEO accordingly, and leveraging my expertise, external resources and judgment gained as a business leader for a Fortune 50.

In a PE setting, normally the board chair and the financial sponsor go deeper in collaborating on the CEO’s performance evaluation and strategy one or two times per year. On a more regular basis, the chair would meet with the CEO to review their actions, decisions and outcomes versus expectations, and discuss how the CEO builds out the management team to meet the growth strategy.

CB: How do you build a relationship of trust with the CEO?

<em>James Mitchell Jr.</em>

JMJ: Trust, as in any relationship, is developed over time. If a trust bond is not developed between the CEO and the chair, then the expertise and network of the chair is underutilized, possibly leading to suboptimal outcomes for the business. A strong trust bond sets the stage for open and honest dialogue between the CEO and chair.

Frequent meetings and weekly Zooms between the chair and CEO are methods that I use to build the relationship and remain current in the business operations. We begin our journey as fiduciaries by developing an overall operating rhythm with the CEO, the management team and the other independent directors. It’s important to have monthly business reviews where the key drivers of the business are talked about in a thoughtful way and action items assigned. Along with biweekly finance calls, those are two best practices I use to keep an open line of communication between the CEO and the chair, which helps to build trust. The chair should have the flexibility to establish ad hoc committees and call special board meetings as needed when unexpected business issues arise; for example, if a suitor expresses an interest in buying the firm, if the regulatory environment changes unexpectedly or certainly if a cybersecurity breach occurs.

To be proactive, I draft the board agenda for quarterly board meetings and always collaborate with the CEO to create the final agenda. After the board meeting, I organize a one-on-one discussion with the CEO on what worked and what didn’t work and get an understanding of the deliverables and who will take the lead on completing them. It’s also important to have an annual strategic planning process that sets the firm’s vision for the next two years. The CEO and the board should spend quality time together on this vision, develop an action plan and establish metrics to measure success. Working together with this alignment of interest is a powerful tool to build trust and drive growth for the business.

If a business problem comes up before the next board meeting and the chair hasn’t been apprised early or his or her counsel is not sought after, that’s an indication that the CEO and chair are not aligned and there is work to be done in developing trust.

At the end of the day, nothing brings the CEO and chair together better than a crisis that could impact the “ongoing concern” or an event that could deliver a negative blow to earnings. The way that the board and CEO manage through a crisis often defines the success of the business and their relationship.

<em>Cindy Burrell</em>

CB: Describe a defining experience in your career with a CEO that prepared you to become a senior business leader and future board director. 

JMJ: During my career at GE as an institutional investor of defined benefit pension assets, I managed a $2.5 billion portfolio of private equity investments. The CEO offered an additional assignment for me. GE had made several hedge fund investments that had grown over time to $800 million with no clear investment strategy. The CEO asked me to evaluate this basket of “risky” investments and recommend next steps. My first move was to put myself in the shoes of a fiduciary whose mission is to protect the retirement assets of GE’s “widows and orphans.” After months researching and learning the hedge fund industry, a clear objective was to focus on the need to generate excess returns for the overall pension while being mindful of the risks to current and future retirees, and to the GE brand. I developed a conservative investment thesis and presented my case to the CEO with strong risk management guardrails. The mindset of a fiduciary was the most important criteria, as I proposed that GE’s conservatively run pension trust invest an additional $500-600 million, build out a cross-functional due diligence team, invest in a cadre of top-performing hedge fund managers to build our own hedge fund of funds that would produce additive and uncorrelated absolute returns for the pension. This was considered a bold investment strategy and was discussed at company headquarters for final approval. My recommendation was accepted, and I was named CIO and team leader for a five-member hedge fund due diligence team. Our team grew this $800 million basket of alternative assets into a $2.5 billion, multi-strategy, global hedge fund portfolio that outperformed the S&P 500 by over 600 BPs over a seven-year period, with less risk than the market. Again, having the mindset of a fiduciary focused on understanding and protecting the company’s downside, was a huge lesson learned for me. This “guardian of the assets” approach guides my decision-making as a board leader to this day.

CB: What happens when the financial situation is lean, yet the cybersecurity risk is high and there is not a focus on spending money for protection? What ideas do you have to encourage investment in cybersecurity risk protections?

JMJ: My initial reaction is that cybersecurity risk is probably one of the top two risks in the corporate board governance arena. Cyberattacks are often actively engineered from foreign countries or bad actors in this country, or they happen internally because of poor data hygiene, which then interferes with the basic services we all depend upon (the electric grid, food supply and healthcare delivery, to name a few). Cyber risk is not just an IT/technology problem. Cyber risk has become an issue for the “top of the house” to plan for, manage, mitigate and shore up its cyber defenses.

Bringing the business case into the picture, I’ve lived through several cyber events. The financial impact on revenues, EBITDA, losing customers, market share, and reputational risk, combined with a possible threat to the ongoing concern, are all very real business issues. The board’s role from a fiduciary standpoint is to emphasize the need for prevention strategies, tabletop exercises, fraud detection tools, baseline assessments, having an external group of consultants in the queue (or on retainer) in case of a security incident and workforce training (almost 50% of cyber incidents are caused by employees, mostly unknowingly). When there is a cyber breach and companies are not prepared, it’s all downhill, often with great speed, and shareholder value can really be destroyed.

In building a strong and trusting relationship with the CEO, there is an opportunity to help focus cyber investments on prevention and collaboration that leverage the board’s cyber and business expertise rather than suffer the consequences of a cyber incident after the fact.  Cyber incidents occur daily, destroy shareholder value, create economic havoc and negatively impact the lives of customers — the most valued asset of a business. I can’t think of a more important global business imperative for CEO and board collaboration.

James Mitchell Jr. is board chair of Fora Financial and audit chair of Aegion Corporation.

Cindy Burrell is an advisory board member of Skytop Strategies and president of Diversity in Boardrooms.

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