When conflict arises between a CEO and a Chair

When a rift develops between the CEO and the Chair of the board, ultimately, it is the rest of the board who will decide the outcome.

The CEO/Chair relationship is one of the most important in any organisation. If the relationship between the CEO and the Chair is toxic rather than healthy, the organisation will suffer.

The CEO and Chair need to have mutual appreciation and respect for their relationship.

Should the relationship between the CEO and Chair collapse, little can be achieved within the organisation.

The most common reason CEO and Chair relationships fall apart is a lack of clarity and agreement regarding their roles.

“The Chair is responsible for running the board, while the CEO is responsible for running the organisation. I often see this confused,” says David W Duffy, CEO of the Corporate Governance Institute.

The CEO and Chair must respect and trust one another, as well as their respective leadership teams.

“If they can’t fight in the trenches together, then they don’t have a genuine and fulfilling relationship,” says Duffy. “There are seven common reasons the CEO and Chair develop irreconcilable differences:

• Failure to understand respective roles;
• Miscommunication or poor communication;
• A lack of mutual respect;
• Insisting on personal goals over the business’s goals;
• Having dominant personalities on one or both sides;
• Not having the appropriate knowledge or skills to perform their roles; and
• The corrosive effects of internal politics.”

Below is a high-profile case study involving Steve Jobs, the Chair of Apple and the then Apple CEO, John Sculley.

This case study of a conflict illustrates what can happen if some of the issues raised above do not receive the appropriate attention at the right time.

It is fascinating to hear John Sculley (CEO) talk about how Steve Jobs (Chair) came to be fired.

Looking back, Sculley admits that he didn’t understand Steve Jobs’ vision.

The whole ‘devastating’ incident developed because of lack of communication, a failure to understand roles, insisting on personal goals, and two dominant personalities.

Looking back, Sculley says he ultimately blames the board for what happened.

The board knew Steve Jobs better than he did and should have worked to reconcile Sculley’s thinking with Jobs’ thinking.

In the end, they fired Jobs, something Sculley profoundly regrets.

Yes, is the short answer. The board didn’t do its job properly.

The board needs to take action as soon as it senses that the conflict between the CEO and the Chair moves from positive to negative.

If the board lets things escalate, the company’s finances and reputation may suffer, staff morale will dwindle, and the firm may go out of business.

“It is sometimes possible to fix a misunderstanding between the CEO and the Chair by using a third party as a sounding board. In more difficult situations, independent mediation may help to avoid damaging conflict,” says Duffy.

The goal of the board is to turn bad conflict into good conflict.

In the case of Jobs versus Sculley at Apple, a disagreement over strategy could (and should) have been settled quickly.

Instead, the board (which Sculley later blamed) chose to escalate the matter, and things came to an unfortunate head.

Only one of the men could remain at the company, and the board selected Sculley.

“Another way to prevent conflict from arising is to keep an eye on things,” says David W Duffy. “In large organisations, appraisals for both the CEO and the board are valuable tools that keep track of performance, set objectives and identify potential areas for improvement.”

Many companies carry out CEO appraisals, but the approach to director appraisals can be mixed, so this is something to keep in mind.

“Good communication between the CEO and the Chair and an understanding of their respective roles are essential in avoiding disagreements.”