In my ongoing work as a leadership advisor, I’m always fascinated by the relationship that exists between a CEO and their board of directors.
I believe there must always be a “dynamic tension” between the CEO and the board. This ensures the lines of accountability are not blurred, important business topics are addressed in an open and timely manner, and that the board and CEO always focus on the best interests of shareholders.
I’ve seen times when the relationship is too cozy – there is no tension whatsoever. Everyone is on autopilot and nothing significant gets done.
I’ve also seen times when the dynamic tension is too much resulting in a strained or confrontational relationship. When this happens governance is significantly impeded.
One doesn’t have to look too far to see this example playing out at Microsoft. As CEO Satya Nadella continues to put his mark on the company, it’s clear that one of his priorities is in establishing a strong relationship with the board – something that evaded his predecessor, Steve Ballmer. Through his last year with the company, Ballmer was in constant conflict with his board, and the company suffered as a result.
Many CEOs have told me it’s nearly impossible to ensure everyone on the board supports what they are doing. Every board has its doubters, cynics and dissidents. Personal or special interests will sometimes trump organizational priorities.
If mismanaged, this relationship can be a CEO’s undoing. Managed properly, however, it can form the basis for the dynamic tension required between the CEO and the board.
Case in point: Antoine Frerot, CEO of multinational water and waste management giant Veolia, has faced two coup attempts in as many years from his board of directors.
Frerot revealed recently that Groupe Industriel Marcel Dassault, a family owned business empire that is the second-largest investor in Veolia, tried to get the company’s board of directors to oust him as chief executive.
Two years ago, Frerot faced a similar challenge from state-controlled utility EDF, which at the time was led by former Veolia CEO Henri Proglio. After failing to convince the board to oust Frerot, EDF sold its stake in Veolia.
The reasons behind the multiple coups are, of course, a matter of some debate.
The value of Veolia shares has dropped by nearly half since 2008 and Frerot had been frantically trying to trim the company’s massive debt in a bid to return the company to profitability next year.
It would be easy to assume that, based on the two coup attempts, Frerot was vulnerable because he had mismanaged his relationships with key investors.
However, a deeper analysis reveals that Frerot is practicing a critical leadership tenet: always ensure that your supporters are more powerful than your detractors.
Courtney Pratt, now chairman of the board at Knightsbridge Human Capital Solutions, remarked to me recently that for CEOs, having “the full support of the board” is essential, even if that means not having the “support of the full board.” Although you can operate effectively without support from every single director, ultimately you cannot function without the support of the majority of the board.
CEOs and all leaders for that matter need to continually assess the strength of their supporters relative to detractors. This can be difficult because supporters and detractors may shift from issue to issue. However, it’s a key leadership skill to hone in order to ensure a healthy dynamic tension exists.
Frerot obviously had a good assessment of the strength of his supporters and detractors. Veolia’s board is reportedly poised to recommend to shareholders that his term as CEO be extended for another four years.
The lesson here is pretty clear. While you don’t need everyone’s support, you need to ensure you have just enough support to lead effectively.
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About the Author
Vince Molinaro is the Global Managing Director of Strategic Solutions at Lee Hecht Harrison. He is also the author of The Leadership Contract – a New York Times and USA Today bestseller. Vince has spent more than 20 years as an adviser to boards and senior executives looking to improve leadership in their organizations.Follow on Twitter More Content by Vince Molinaro