Чтение литературы по специальности на английском языке. Теория и практика информационной обработки текста. Учебное пособие для студентов факультета эк

directors. I was able to speak either with all of the directors or a large part of them on all three boards. In one case, I was also able to interview all the non-director senior managers who had regular contact with the board.

The organizations ranged in size from small businesses to the nation’s largest and best known companies, their industries included heavy manufacturing, banking, insurance, energy, telecommunications, publishing, transportation, forest products, aircraft parts, retailing, and chemical processing.

If the board has a sense of itself as a group, other directors less immersed in the specific issue can make comments such as, ‘I’m a bit uncomfortable with the tack we’ve taken on this. Does anybody else feel that way? Can’t we meet this issue head on?’ These kinds of comments address the whole group, invite all to share responsibility for shaping the quality of discussion, and discourage blaming individuals when the conversation becomes ridden with conflict. Unless the board develops (and values) a sense of itself as a group, the directors won’t ask these questions. From an exclusively individual perspective, they make no sense.

How would a board with a strong sense of itself as a group handle a thorny situation? In one case, two committees were working on a transition between CEOs. One committee presented the predecessor’s perspective, and the other, that of the successor. To reconcile the discrepancies, the board asked for an executive session with neither past nor future CEO present. Although this meeting made both executives uncomfortable, it did set into motion a series of events that helped clarify the relationship between the two and ultimately led to a smooth transition. Eventually the executives talked together with the board about the issues that were disturbing people. As a group, this board effectively addressed natural conflict between two very valuable executives.

A piece of history

One simply cannot understand how a particular board operates without an appreciation of its history. One big corporation, for example, had an explicit contract about information sharing with its CEO. It wasn’t clear why until a director explained that during

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the former CEO’s tenure, a board member – a distinguished public figure – had resigned because he believed the CEO was misleading him. Senior directors’ judgments and decisions are thus informed by a sense of history. New directors both discover history and, of course, help to make their own.

The historical understanding about how long a CEO should serve and how to manage the succession planning affects virtually every director who serves during the terms of more than one CEO. Unless the whole board continually makes special efforts to be clear about this, individual directors are likely to have varying perceptions, and a large number of them – most likely the least senior and least informed – will act as if the subject is too sensitive to discuss explicitly. From an exclusively individualistic view, this situation poses minimal problems as long as the time is not ripe to change CEOs. A group perspective suggests, however, that whatever understanding directors have of this important matter will influence the behavior of both individual members and the board as a whole.

Board & CEO

Probably the most important factor shaping the dynamics of the board-management relationship is the CEO’s style. In a variety of ways – both explicit and subtle – CEOs tell directors what they want, and they usually get it. Only in a crisis do directors depart from the CEO’s expectations, and then they do so deliberately. CEOs set the style of board-management exchanges by the kinds of issues they bring to the board, by the quality and timeliness of the information they give directors, by the nature of their presentations, and perhaps most important, by their responses to board members’discerning questions.

CEOs also affect the board’s group dynamics by the kinds of issues they take up with directors individually and then do not bring forward for the whole board to consider. The more a CEO indicates to directors that they should discuss sensitive issues outside the boardroom, the more board members will remain silent when these kinds of topics come up and the less the board will develop a sophisticated capacity to work as a group with such subjects.

Directors readily assert that their most important responsibility is selecting and evaluating the chief executive officer. Once selected,

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however, the CEO plays a key part in choosing new directors. Under certain circumstances – status change, ill health, poor attendance, inadequate performance, or philosophical differences – a CEO may ask a director to resign. Directors and managers are most guarded when either party thinks a person in the other group should leave.

Of course, different boards treat the selection of new directors differently. On some, the CEO nominates new members for the board to approve. On others, a board committee conducts a search for a new director, whom it discusses with the CEO. Because they recognize that the board-CEO relationship is too sensitive to be jeopardized by directors opposing the CEO’s preference, few directors argue that a board should impose directors against a CEO’s wishes. When someone purchases a large proportion of stock, however, the CEO may have little influence over whether he or she joins the board.

How new board members are selected also affects the boardmanagement relationship. When the CEO selects a new board member, the relationship between CEO and board member is emphasized – the new director is encouraged to feel beholden to the CEO. This bond slows down the process by which the new director identifies himself or herself as a member of the board as a group. On one board in which the CEO handpicked all the directors, members reported they felt obliged to honor the CEO’s clear preference for a passive board, even when they believed that they should discuss more at board meetings.

Collaboration between a board committee and the CEO to choose new directors takes both parties’ interests into account. Because directors as well as the CEO get to know the new director early in her or his tenure, the process by which the new director psychologically enters the board as a group is accelerated. When a major stockholder joins the board, the potential for conflict between the board and management, with the former undermining the latter, increases.

CEOs are likely to have more influence with boards later rather than earlier in their careers. Early on, CEOs have little influence in shaping the board’s membership. Moreover, the board is likely to be especially vigilant in overseeing the chief executive’s performance. Later in the CEO’s career, particularly if the corporation has done

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well, directors are likely to be more confident and relaxed about the CEO. By that time, the CEO will have selected – or helped select – a large number of the directors and these people will be predisposed toward the person who brought them onto the board.

Chief executives differ from each other in their attitudes about relating to the board. I asked both executives and directors on the same boards what they thought the objectives of the board should be in its relation to management and vice versa. Whether their answers dovetailed told a lot about the relations between that particular board and management.

A most telling answer by chief executives was, ‘The job of the board should be to support management’. When CEOs give this response, the portrait of board-management relations they give during other parts of the interview vary widely from the picture the other directors paint – almost to the point that an observer might be listening to descriptions of two different boards. A chairpersonCEO whose chief concern is to have a supportive board may, ironically, lose track of how other board members perceive events. Consequently, the board-management relationship may evolve into something quite different from what other board members desire.

Other chief executives said, ‘The job of management should be to create an atmosphere in which directors feel free to ask management thoughtful and penetrating questions’. Executives who give this answer usually go on to say that in this kind of environment, controlling their own defensiveness is not easy. They observe that if directors sense management’s uneasiness, they often stifle their questions.

One CEO told me that he had learned to identify symptoms of his own impending defensiveness and was consequently able to control his tendency to cut off questions about important subjects. When chief executives gave this kind of answer, the pictures of board-management relations that both directors and management draw were similar: different members often chose the same examples to illustrate their points. And again ironically, these executives, who for the most part encouraged discerning questions by directors, turned out to have boards with confident and supportive feelings toward the CEO.

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It seems that CEOs are more likely to develop genuinely supportive boards if they watch their own behavior in the boardmanagement relationship. Chief executives who press for nearly unquestioning support may achieve it superficially. But when serious problems confront the organization, CEOs who can’t be fully receptive to directors’ concerns are likely to find themselves trying to work with a fragmented group.

Ending the relationship

A number of the directors I talked to gave accounts of how their boards forced chief executives to resign. Directors reported that they sensed difficulties-often that the CEO was covering up problems-several years before the departure. And their feelings only intensified if they felt that the CEO was trying to deflect or subvert their inquiries. Despite their uneasiness, however, directors generally believed they couldn’t raise their concerns unless something was obviously wrong with financial indicators. During these periods of discomfort, the directors waited. Some considered resigning.

Two clear signs usually preceded the turning point: first, financial indicators would drop; second, directors would meet in subgroups outside board meetings without the knowledge of the chief executive. After these two things happened, the course of events seemed inevitable, yet it often took two or three years to unfold. Once the process of removing a CEO was under way, in no case I heard of did it reverse and the executive regain the board’s confidence.

The initial stage of the process of removing a chief executive is an illustration of the board’s failure to act as a group. For a period of time, a subgroup of the board works independently without authorization. Eventually the entire board acts against the CEO, but by then it’s too late for the CEO to learn from the board’s criticisms. By the time it’s made, the decision to remove the chief is long overdue, so this process can endanger the welfare of the entire corporation.

Some complex dynamics, which inhere in any group-leader relationship and which are particularly relevant in corporate boardCEO relationships, underlie this removal process. Because leaders

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cannot avoid frustrating some people even as they satisfy others, group members generally have mixed feelings about the person in charge regardless of how well or how poorly they think he or she performs. At any time, directors could find and harness latent forces in favor of removing the CEO. Obviously, the less a CEO knows of these feelings, the more dangerous they become.

Directors, however, are fundamentally ambivalent when it comes to acting against a CEO. Even very dissatisfied people recognize that any change will evoke some turmoil, much of it out of their control. Those at the tops of organizations have a special awareness of the fragility of social institutions. People in these positions know how subtle and complex the processes are that move institutions toward their goals. Because they are at the top, directors and managers have a harder time than individuals in lower positions projecting responsibility for what happens onto others. Because they sense that the likelihood that something will go wrong is high, they are often slow to make changes. Directors also are committed to supporting the corporation’s best interests and feel loyal to the incumbent CEO. Finally, many are CEOs themselves and may empathize, feeling ‘There but for the grace of God go I’.

Another way, besides removal, to resolve ambivalence toward a CEO can be to consider a merger in which the CEO changes without the directors having to act. By being receptive to purchase, directors can affect the company’s stock price and thereby reason that they are honoring their obligation to represent shareholder interests.

Chief executives make a clear choice, whether actively and consciously or instinctively and unconsciously, about how much they disclose to, and how much commentary they invite from, their boards. People who choose to have a more active and open board gain the benefits of diverse and sometimes conflicting views and are less likely to be surprised by their directors’ resignation request. The open board exacts a price, however. It produces more turbulence and emotional upset for the CEO than a controlled board ever would.

In the short run, chief executives who choose the more controlled operating method have an easier time than those who encourage communication – especially as long as their financial indicators remain favorable. Supporters of the more closed method

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point out that open discussion can subtly seduce directors away from making the kind of tough-minded and independent judgments they are obligated by law to undertake. The group dynamics of the more controlled style certainly suggest that when a board of directors turns against a CEO, it does not turn back again.

Neither style is without its strengths and limitations. Moreover, as important as the CEO is in determining board-management relations, no one person can establish a way of operating without either the active cooperation or the passive collusion of other key board members. The relationship of board members to the CEO, in turn, depends on the subgroup dynamics of the board itself.

Subgroups &, factions

Many directors reject the idea that subgroups influence a board’s actions. When questioned about this, directors often answered with some feeling, ‘This is a good board; we don’t have factions!’ But subgroups naturally form within groups. I have never observed a group of more than two people that did not fragment from time to time. People naturally combine and act in accord with one another because they share similar experiences, perceptions, and interests or because they differ in orderly and predictable ways. Subgroups become factions only if they are engaged in hostile and covert conflict with one another. The more effective boards I observed seemed to lack factions.

Inside and outside directors generally form natural subgroups. Arguments to restrict the number of management directors are based on the premise that, at the board level, they won’t disagree. This position is sound. Managers disagree strenuously among themselves when determining which recommendations to bring to the board, but once on the board, they usually take a management position. Repeating management disagreements before the board turns directors into managers and undermines management’s authority. Directors’ value lies in their independence from the managerial decision-making process.

Outside chief executives also form a natural subgroup. Their primary value is that they have faced similar problems and can respond to the soundness of a management recommendation based

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on personal experience. For this reason, many chief executives find comments from fellow CEOs especially valuable. In their early years of service, CEOs tend to prefer other CEOs as new board members. Later in their careers, they may seek other types of directors.

A large group of CEOs on a board can also pose a potential hazard. Imagine a board populated by outside directors, all CEOs and all friends of the chief executive. How likely is it that such a board would offer an adequately diverse set of perspectives on management recommendations? As a group, CEOs might unconsciously suppress questions that other less empathic directors might ask.

The chairperson’s position also influences the relationship between inside and outside directors. In many corporations, the chief executive also serves as chairman of the board-the two titles are virtually synonymous. In others, the titles reflect developmental stages in the relationship between the chief executive and the board. During the early period of a CEO’s term, the chairman of the board would be a senior director – often the new CEO’s predecessor. Later, as the new chief executive becomes more familiar with the top role and the board has more confidence in the CEO, the chairman title shifts to him or her.

Someone other than the CEO can usually be more responsive to the directors’ needs and interests. A new CEO may genuinely appreciate having the burdens of running the board taken over by someone else, and directors may like having one of their group help plan meetings and structure discussion. One organization I studied had formalized the role of presiding director– as distinguished from chairperson – whose chief responsibility was to lead the board in the performance of its duties. This setup works if the board conceives of itself as a group and deals explicitly with the qualities of the relationships among the board, the presiding director, and the chief executive.

Committees also contribute to the board’s subgroup dynamics. The size of the board and number of committees determine in part the kinds of work the committees and the board as a whole do and how they do it. Compare a ten-person board with a twenty-person body. Because virtually any committee will contain nearly half the directors, a board of ten is more likely to hold discussions at which

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everyone is present. Lack of air time drives a board of twenty to conduct its detailed discussions in committees. On a board of ten members, directors more readily develop a sense of themselves as a group, while this is very difficult, if not impossible, on a board of twenty. The large board has difficulty doing more than routinely approving committee recommendations.

As it turns out, most boards have between ten and twenty members and, as a result, experience some tension in determining what work committees should do and what work the full board should cover. Needless to say, the less a board does as a full group, the fewer directors will learn how to operate effectively as a total entity. To be an effective group, a board has to do more as a total body than carry out routine approvals.

Minority and female membership on boards has increased during the last 15 years from virtually none to a small number. By widening their minority membership, boards can gain the different perspectives these people can bring to a subject. But for the board to reap the benefits, white male members of boards have to be willing to change their views. Otherwise, women and members of racial minority groups serve only as tokens.

Boards of all white men rarely accept others without some disruption. Most of the white female directors with whom I spoke assumed that part of their work as directors was to help the men feel comfortable having women in the boardroom. Several minorities described poignant incidents that took place when they joined a board. A black director described an episode in which a senior white male director (who the black director later learned was noted for being tardy) confronted him about being late for meetings at his first board meeting. The minority and white female directors I talked to knew very well when their presence and perspectives were welcome and when they were not.

The kinds of problems the corporation faces also affects how subgroups operate. Because directors are aware of the limited discussion time in board meetings, they tend to speak, and then economically, about topics in which they have expertise. Consequently, subgroups of directors informally develop based on their recognized knowledge of recurrent problems facing the

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organization. The board’s composition may also change to increase the board’s capacity to respond effectively to certain classes of questions. In general, as the environmental problems facing the corporation change, so do the subgroups of directors.

Effective boards

The board’s chief task is negotiating the effective authority of management – of the board and of the board-management relationship. Effective authority means the legitimate right to do work. Effective authority changes over time as a result of:

–the personalities and operating styles of the chief executive, the board chairperson, and the directors;

–the career stage of the CEO;

–the size of the board and its committee structure;

–the subgroup diversity of the board;

–the exchanges between the corporation and its environment;

–the presence or absence of an active mechanism for the board to review its own structure and process.

Of these, the two most important are the first and the last. Directors and executives do not have a choice about whether these factors will shape their effective authority. Board members do have options about how they respond – individually and collectively – to group forces. The chief executive and chairperson control only a portion of the forces that affect the board. To harness the other forces requires cooperation between executives and directors. Fortunately, executives and directors may intervene on many points to improve the group effectiveness of a board-management relationship. They may collude either to establish a rubber-stamp board or to undermine management’s capacity to lead a corporation. Or they may cooperate.

Regardless, group forces will affect corporate boards. The directors and CEOs who want to be more effective will learn more about the group’s dynamics and about how they act within their group to improve their board’s operations.

I began this article with an example of how a subgroup affected how board meetings ended. By acting on their individual author-

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