When the board fails to tame a CEO

This story is an ‘alleged’ transcript of an actual radio conversation between a US naval ship and Canadian maritime contact off the Canadian coast in October 1995.

Americans: “Please divert your course 15 degrees North to avoid a collision.”

Canadians: “Recommend you divert your course 15 degrees South to avoid collision.”Americans: “This is the captain of a US Navy ship; I say again divert your course.”

Canadians: “No. I say again, you divert YOUR course.”

Americans: “This is the aircraft carrier USS Lincoln, the second largest ship in the United States’ Atlantic fleet. we are accompanied by three destroyers, three cruisers and numerous support vessels. I demand that you change your course 15 degrees north, that’s one five degrees north, or counter-measures will be undertaken to ensure the safety of this ship.”
Canadians: “We are a lighthouse; it’s your call.”

Legal mandate

Watching the vacuous exchanges that went on between parastatal boards, defiant parastatal CEOs and Ministries over the last 12 months reminded me of the story above.

Beginning with last year’s nail-biting saga between the Board of the Kenya Youth Enterprise Development Fund, its CEO and the Minister for Youth Affairs saga to the more current saga at the Kenya Ports Authority with the on-again off-again suspension of the CEO.

It all boils down to who’s got the legal mandate to tell a CEO to take a walk.

Is it the board which is the reporting authority for the CEO and from whom power to manage the institution emanates from, or is it the ultimate authority in the form of the parent ministry who essentially represent the shareholders of the institution, in this case the Government of Kenya?

No doubt that it forms the legal conundrum that a CEO can hide behind as he continues to enjoy or fight for the office and stature that he has become accustomed to.

The government, represented by the parent ministry, ends up playing the role of the Canadian lighthouse.

It is entrenched on solid ground, the fundamental source of the power which it delegates to the Board through the constitutive document, which is the Act of Parliament, creating the parastatal.

The government simply cannot be moved.

The parastatal board on the other hand is an amorphous creature from the government’s view point; it can be changed at will with directors serving at its pleasure and who can be asked to change strategic direction depending on where the minister’s wind is blowing.

Enough government ribbing, perhaps it may be worthwhile to examine the roles played by the CEO and the board of directors in the private sector instead.

From an employee’s view, the CEO represents the highest authority in the organisation.

He is the Don Corleone whose edicts from the plush, carpeted executive office are issued as fast as they are required to be executed.

Who can dare challenge him?

Where his actions or inactions lead to low staff morale and the resultant poor customer service, who will check the CEO’s excesses or lacklustre leadership?

On paper, it is supposed to be the Board.

But the ordinary employee has no access to the board and therefore does not know whether that supreme authority is overseeing the CEO’s operations.

After all, if the institution’s financial results make the shareholders happy, it takes a very proactive board to delve deeper into whether the human capital that is delivering those results is satisfied.

But an institution’s board walks a very fine line when monitoring and evaluating the CEO’s performance.

While on the one hand the board has delegated daily management authority to the CEO, it should be able to determine if the human capital is satisfied with the leadership without necessarily undermining the CEO’s authority.

At the end of the day, the board has to find an appropriate system of going behind the fancy Power Point presentations and detail-oriented board packs .

These packets of information are long on institutional detail and short on the emotional element that weaves its way through any organisation.

The shrewd CEO—and there are many—will always ensure that what is presented to his board is what he wants them to see and that any senior manager who comes to make a presentation before that board is well aware of which side his bread is buttered on lest said senior manager gets unnecessarily tempted to let the board know the real story behind the story.

The shrewder CEO will make certain that board directors are both comfortable and happy, permitting preferential access to the institution’s facilities be it loans, consultancies or lucrative deals.

Such a CEO will firmly entrench himself in the institution making it very difficult for the outside world to perceive the organisation surviving without him.

This is even more so where such a CEO is the founder of the organisation and inevitably suffers from “founder’s syndrome” which is common where there has only been one person leading the organisation or the board of directors since its inception and is common in non-profit and commercial organisations that grow beyond their early stages.

During the early phases of the organisation the board tends to be selected by the founder and are either like-minded individuals or people who can be trusted to ‘rubber stamp’ the founder’s decisions rather than offering a more representative view.

As the organisation grows, professionally-trained people are engaged and the board is expanded.

The founder’s domination of the decision making process can frustrate effective group decision making.

The founder becomes the Canadian lighthouse, entrenched in the bedrock of the coastline that can stand in the face of naval destroyers in the form of a board that lacks the wherewithal to challenge his performance.

It takes a confident and independent board to rein in a CEO and an even braver board to resign en masse in the face of adversity as the previous Youth Development Fund board did last year. It was their call, and they called on the side of integrity.

Carol.musyoka@bungani.com