An intern was leaving the office late one evening when she found the CEO standing in front of a shredder with a piece of paper in his hand. "Listen," said the CEO. "This is a very sensitive and important document here, and my secretary has gone for the night. Can you make this thing work?"
"Certainly," said the intern. She turned the machine on, inserted the paper, and pressed the start button. "Excellent, excellent!" said the CEO as his paper disappeared inside the machine. "I just need one copy."
Over the last two weeks, I have been writing about the role of an organisation’s board in providing primary direction on the information that they should be receiving as they perform their oversight role. If board members do not know what they do not know, then the tail is wagging the dog as it were, as management is leading them by the nose ring by providing information that won’t lead to undue scrutiny.
If board members know what they don’t know, then they can ask the right questions to ensure that they get informed enough to provide rigorous oversight as appropriate. So, I received feedback from an old colleague, who is well versed in corporate governance, about the role of the CEO in managing the process by which board members become informed.
I will repeat what he said here: “All papers going to the committees should be signed by the CEO. The CEO causes the reason for the committee meetings and is supposed to present all papers at committees except audit, while backed up by respective functional heads.”
It bears noting that the management buck comes to a screeching halt at the desk of the chief executive officer, or CEO. The responsibility for all acts and omissions of management, scratch that, of the entire organisation lie on the heavily burdened but appropriately remunerated shoulders of the supreme leader.
The fearless one. The iron lion of Zion. So yes, the CEO is supposed to present all papers at committees except audit. But, and this is a big but, the CEO can and should allow the respective office bearer to present the paper during the committee meeting.
Why, you ask? It allows board committee members to become acquainted with the senior management team of the organisation and assess the capacity of those role holders to undertake their role. If the CEO has a weak senior leadership team, then it goes without saying that the organisation will struggle to effectively deliver on its mandate. After all, a fish rots from the head.
Many years ago, I sat on a board committee of an organisation and the external auditor was present as there were some audit matters to be discussed. The head of finance made a presentation about a pivotal transaction that had significant financial implications on the organisation’s future.
At the end of the meeting, the usual closed session without management present was held. The external auditor raised concerns that the head of finance had not informed the board about a critical impact that the transaction was going to have on the balance sheet. The auditor’s concern was that the head of finance should have known that, if she was worth the credentials on her accounting certificate.
A few years later that exact transaction pretty much torpedoed the organisation, bringing it to its unbalanced knees. I’ll take one for the team here as we had been direly warned but we went ahead with the transaction anyway. The buck stopped with the board and the board let the organisation down.
Interacting with senior management also allows board committee members to take a view on the long-term succession planning of the organisation. Can a successor to the CEO emerge from within? Is there someone who can step into an acting capacity in the event of incapacitation of the CEO?
If board committee members are not hearing the voices of the senior management, then they really do not know who’s actually steering the ship. They can only hope that the organisation has the right backsides on seats and, as we all know, hope is not a strategy.
Your CEO is not expected to be a subject matter expert on everything from operations to procurement to human resources to sales. But he must have the capacity to lead all the subject matter experts to deliver on their respective mandates.
The board should regularly meet and hear from these subject matter experts. It allows the CEO time to let his team shine or fade under the searing gaze of the board who bear ultimate responsibility for management’s acts and omissions. It also gives the CEO time to learn the difference between a photocopier and a shredder.
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