As a board member, how do I challenge a CEO?

by Stephen Conmy


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How do I challenge a CEO in the right way? This is a much-asked question by board members, particularly newer non-executive directors.

The daunting reality is that critical decisions made by intelligent, responsible people with the best information and intentions are sometimes hopelessly flawed.

When it comes to corporate governance, it is vital that the board reviews and approves (or rejects) proposals put forward by the CEO and executive.

The most significant mistakes are often made by CEOs who are largely undisciplined by their executive team and their board of directors.

The board and its directors have an essential role to play in challenging and supporting proposals on future strategic direction.

When a board of directors does not pay enough attention to the CEO’s and the executive team’s ambitions, things can go wrong.

The board should act as a ‘critical friend’ to the CEO and senior management at all times, especially when critical strategic decisions are being made. Every area of discussion – including corporate strategy – should be challenged.

How do I challenge a CEO if I have doubts over a strategy?

  • Everyone has biases, so it’s important to manage decisions in a way that balances out these biases.
  • Many experienced leaders already operate like this. However, given how people’s brains work, we cannot rely on leadership to spot and correct their errors in judgment.
  • For important decisions, the board needs to employ a structured process that identifies likely sources of bias. Group decision-making will be strengthened as a result.
Read more – how to test your business strategy

You might have concerns about the CEO’s thinking on future strategy. How do you reveal those concerns?

  • Your first step could be to approach the Chair of the board or raise the issue in a board meeting.
  • Once the board is aware of this, the need for debate and decisiveness becomes paramount. The Chair of the board generally sets the pace.
  • As facts come into focus, discussions about the competence of the CEO and executive management should be kept steady and constructive.
  • In the end, a consensus needs to be reached quickly regarding the course of action: support, coach, or dismiss.

When CEOs make terrible decisions that go unchallenged, bad things can happen. Here are a few examples.

  • Jürgen Schrempp merged Daimler with Chrysler despite internal opposition. Nine years later, Daimler relinquished Chrysler to a private equity company for virtually nothing.
  • Steve Russell, CEO of Boots, developed a health-care strategy to differentiate the stores and grow with dental services. Unfortunately, Boots managers didn’t possess the skills required for success in health care services. As a consequence, Russell left the top job early.
  • Wirecard CEO Markus Braun was arrested when German investigators uncovered evidence that the payments company had used false accounting to defraud creditors of $3.7 billion. The board filed for insolvency.
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