Is this the day we fire our CEO?” opened my Chairman's Letter a decade ago. I thought this question got at the fundamental purpose of a board of directors; namely, whether the top leadership, in particular the CEO, has the strategic vision, requisite skills, and personal capacity to drive the company forward. Since this determination is the most important decision continually facing a board, I suggested that every executive session begin with this query. The following week, a segment of my piece was picked up by the New York Times, and I received many supporting comments.
Over the course of three decades serving on boards, I have heard penetrating questions regularly posed at meetings, including: “What keeps you up at night?” “Who can take over if our CEO gets hit by a bus?” “What are our greatest threats and greatest opportunities?” “Do we have the resources, in particular the people, to do this?” “What could go wrong?” “Where does this take us?” “How will the Street react?” (Other recurring questions are perhaps more telling of directors' interests and capabilities: “How do you download the Diligent Book app?” “What's my password?” “Can someone print out my boarding pass?” “What's for lunch?”)
Directors need to constantly probe top management. They should not merely accept management's broad explanations; they should dig deep and get to the bottom of things.
Making truly informed decisions takes time, information, and deliberation. Consequently, boards are meeting more frequently, deliberating longer, and getting more objective advice. To help guide their decision making, directors are accessing ideas and opinions both from within the company and from outside consultants whom they hire directly.
In response to some prominent corporate screw-ups, including failed acquisitions, strategic blunders, and botched successions, attitudes of directors have changed. They have become more doubtful of management's recommendations and more suspicious of management's motives. Boards will always remain dependent on the honesty and forthrightness of top management in general, and the chief executive in particular. However, they need to be independent and to act independently. They need to bring to the boardroom heightened skepticism and increased scrutiny, enabling them to delve deep to understand the implications of major business decisions.
Boards have the obligation to get all the information necessary to provide good corporate governance, and thus they need to ask penetrating questions. Bringing to the boardroom their wisdom, experience, character and judgment, directors should be both confident and competent in engendering open debate that challenges management and holds them accountable for results. Pressing for answers to the right questions includes asking, “Is this the day we fire our CEO?”