Lack of Clear Expectations is A Major Source of Conflict Within the Boardroom and Between the Board and CEO

It is a privilege and an honor to serve on a board.  However, having worked with and served on a variety of boards, I have found that many directors have preconceived notions or expectations of what it means to be a director that may not be in line with their board colleagues and the CEO.  In addition, some CEOs have different expectations of the board’s role than the directors. Without clear expectations, unnecessary conflicts can ensue.

Good governance is the ability of a board to make the best decisions possible on behalf of the organization and its stakeholders.  Good decision-making requires directors to ask questions and engage in discussion that can create conflicts within the board and between the board and CEO, if directors and the CEO are not clear in defining, understanding, and executing their respective roles.  The ideal is to have a board acting as a team, gaining strength from the contributions and diversity of expertise of the individual directors, and working in partnership with the CEO based on mutual understanding, respect, and trust.  Just as hope is not a strategy, wishing that clarity will emerge is not a good way for boards and CEOs to work together.  It is far better to have clear understandings up-front and to confront conflicting expectations than to try to repair damaged relationships. 

Every director knows that their role is one of oversight, and that the CEO is responsible for operations.  But the meaning of these terms can mean different things to different people.  When problems occur, the refrain is usually the same: “I thought it was understood,” or “how could they have assumed I meant that?”  For example, directors know they have fiduciary responsibilities for Duties of Care, Loyalty, and Obedience.  However, I have found that many directors do not know what these duties mean in practice--that each director is personally responsible for getting the information needed to understand both the opportunity and the associated risks.  One cannot fulfill their Duty of Care without questions and discussion. I suggest that directors consider they have a responsibility for what I call “Duty of Inquiry.”  In this regard, CEOs and executives need to recognize they have more information than does the board, and that it is only through inquiry that directors can learn and contribute.

In addition, loyalty and obedience mean that every director will support the decisions of the board, regardless of their positions during discussion, they support the mission and vision of the company, will respect board confidentiality, and that they will avoid conflicts of interest.  Once a director enters the boardroom, the only interest that matters should be that of the organization.  In some cases, constituents such as regulators and others may ask about positions taken within the boardroom.  The boardroom should be considered a “Black Box”- information comes and decisions emerge, but no one other than directors need to know what went on inside. 

Many boards put too much emphasis on consensus and “getting along.”  Boards need a culture that invites inquiry and discussion. Seeking the best decision for the organization often requires discussing contentious issues.  Don’t be afraid of debate.  Instead of consensus, have as an objective “constructive contention,” in which agreement is reached, not assumed.

The chair must be adept at assuring each director is engaged, that discussion is not curtailed too early, that “aggressive” directors do not silence more “reticent” colleagues, and that debates remain on the topic and toward objectives.  As the main interface with the CEO, the chair also needs to work with the CEO toward a partnership of respect and trust, and an understanding that governance is a shared responsibility.  The CEO needs to respect the full fiduciary responsibilities of the board.  Once again, don’t assume, clarify.  Remember the words of the great philosopher, Humpty Dumpty, who said, “words mean what I want them to mean.”  Clarify what words, working relationships, and objectives mean.  Confront conflicting expectations quickly to get things back on track. 

Here are some steps every board can take to enhance its effectiveness and foster the best relationship between the board and CEO:

• Unlike boards in which directors are elected, some private and non-profit directors are appointed by the CEO or founder(s). When considering a new director, clarify expectations upfront.  Onboarding of directors is a very important step.  Provide not just the background and history of the company and its market, but also the expectations for director behavior.  It is better to not bring a director on board than to run into conflicts later due to misunderstandings.  Similarly, those considering joining a board should make certain their expectations are in line with that of the CEO and others on the board.

• The CEO needs to embrace the concept of partnership with the board. Founders of companies and family members of a long-standing company clearly know more about the company than anyone else.  It is understandably difficult to have directors asking questions that family owners know instinctively.  But directors cannot learn through osmosis.  The outside perspective of directors can help private company owners to see things from a different perspective, if they are encouraged to do so.

• If the company has investors who are board members, there should be clarity upfront that the investor’s first interest should be the long-term success of the company.  I have been involved in situations in which it was unclear if the investor/director had interests in line with the rest of the board and CEO.  All directors should be able to argue their positions, but the interests should always be on what is best for the company, not on short-term interests that might not be in the best long-term interests of the company. Once again, before taking investment and agreeing to a board position, assure that the investor clearly understands the interests and objectives of the company.

• Every director should respect and trust colleagues, CEO, and members of the management team. Debating ideas and data is fine, but criticism should never become personal.  There is a saying that we judge ourselves by our intentions and others by their actions. Assume that everyone has the best intentions in their questions and debate.

• There are differences in how people handle debates and conflict.  The chair needs to assure that all directors are engaged and heard from.  Try not to let more aggressive directors cajole others into agreement.  Ensure that all have a chance to have their views heard.

• An important role for a board is to help the CEO navigate the future.  A good rule of thumb is that 75% of board discussions should be on the future. The past can provide useful information, but too much board time spent on the past is not helpful.  You don’t drive a car while looking in the rear-view mirror.  Keep your focus on the “road” ahead.

In summary, clear expectations of each director and between the board and CEO will make the board more effective, and help the company prosper and avoid unnecessary drama and conflict.

 ABOUT ELLIOT S. SCHREIBER, PhD

Elliot S. Schreiber, Ph.D. is a member of the Southern California Chapter of PDA.  A former corporate executive, consultant and academic, he works with boards and CEOs on board effectiveness, as well as aligning the organizational strategy with the expectations of stakeholders. He is the author of “The Yin and Yang of Reputation Management: Eight Principles for Strategic Stakeholder Value Creation and Risk Management” (2021),  He received his Ph.D. from Penn State University.