The Board-CEO relationship is one of the most critical dynamics in any organization. When this partnership thrives, so does the entire enterprise. But when it falters, the repercussions can be swift and severe.

CEO Success: What the Data Tells Us

The corporate world is a tough arena. In the first half of 2024, a staggering 1,250 CEOs in the U.S. made their exits—the highest number in two decades[1]. Even more startling, about 60% of CEOs don’t make it past the 18-month mark, with over half failing within that timeframe[2]. And while “retirement” is often the official line – the second-most cited[3] reasons for CEOs leaving their jobs in 2024[4] – more than half of these departures are less than voluntary[5].

The fallout from a failed succession? It can cost up to 25 times the CEO’s salary and plunge the organization into years of turmoil[6]. Add to that the rising trend of CEOs being ousted for scandals or misconduct[7], and it’s clear: it’s never been more critical for boards and CEOs to establish a well-defined, collaborative relationship to mitigate these risks and foster stability for the organization.

Navigating Built-In Tensions

The Board-CEO dynamic involves certain inherent and unavoidable tensions; in fact, the roles are deliberately designed with dynamic tension between them. However, if managed poorly, these tensions can hinder success for the entire organization:

• Responsibility: While the board holds ultimate accountability, the CEO represents the organization’s public and operational face. In fact, when things go wrong, it is usually the CEO who is held accountable.
• Leadership: The CEO is usually the board’s sole employee, while the board’s role is to govern collectively. Thus, the CEO is one individual, leading a large group, and the board is a group that only directly leads one person, and must use its power and influence to have that person lead the organization.
• Information: The CEO lives the day-to-day of the organization and has real-time insights; the board relies on periodic updates. If “information is power”, this can be both a source of disconnect, and a reversal of the power dynamic.
• Expertise: Directors contribute diverse experience, but the CEO knows the specific nuances of the organization’s operations.
• Tenure: Directors turn over by design, while CEOs often stay with an organization for a longer period.

Each of these structural tensions has an impact on power, mutual expectations, and what is required to navigate for collective success. They can either be stumbling blocks or stepping stones, depending on how they’re managed. You can’t avoid them, but boards and CEOs must navigate them constructively to achieve the organization’s purpose.

Strategies for Building a Strong Board-CEO Relationship

At the heart of a strong Board-CEO relationship are trust and mutual understanding; with those in place, the dynamic tensions can serve their purpose, creating a healthy degree of difference. Trust and mutual understanding create the platform to embrace differences, seek clarity, give constructive feedback, and course-correct together, so that healthy tension doesn’t become polarization, power games, blocking, or ringfencing,

So how can boards and CEOs actively cultivate the trust and mutual understanding they need?

1. Bring it Back to Purpose: Continuously align actions and strategies with the organization’s purpose. Go deeper and ask which approach would support the organization’s purpose – in the end, that’s what everyone at the organization is there to do.
2. Expectations are Mutual: Know what you need from each other to drive value. Have a conversation about the value you provide to each other and the organization, and therefore what you need from each other to deliver that value. For example, what does the CEO ideally want to take away from a board meeting? Hearing Directors’ expertise? Support for the CEO’s way forward? Clarity on how the board interprets strategy? What would the board need in turn to deliver that, such as timely transparency, curated materials, and straight talk? It can be helpful to have a facilitator for this if you’re doing this for the first time or have struggled with expectations in the past.
3. Build Trust: Trust is the currency of collaboration. It takes ongoing work to build and can be damaged in an instant. For many boards, building trust includes a no-surprises approach, confidence that they are hearing both the good news and the bad, and a sense that the CEO acts on feedback and guidance. For CEOs, the board’s ability to speak with one voice, be measured in its response to bad news or challenges and respect the CEO’s space are key. Commit to clarity, consistency, and reliability in your interactions and decisions.
4. Foster Chair-CEO Partnership: The Chair-CEO relationship is a crucial channel for Board-CEO collaboration. It can help test ideas, support the CEO, and build trust. Together, the Chair and CEO are the bridge between the collective of the board and the collective of the organization; that bridge needs to be strong. Encourage an aligned, candid, and collaborative relationship between the Chair and the CEO. Choosing the right Chair, defining the behavioural aspects of the role, and developing supportive practices (cadence of meetings and conversations, etc.) are important aspects of this.
5. Calibrate the Relationship: Build trust with frequent mutual feedback and dialogue, in the spirit of continuous improvement. Make sure to show appreciation for the positives along with being respectfully frank about things to do differently, and to problem-solve together rather than looking to assign fault.
6. Process is Your Friend: Implement thoughtful processes for goal setting, evaluation, compensation, and succession planning. This includes the processes whereby the board gets feedback and improves its own effectiveness. Following process helps build trust. It also takes the feeling of something being personal out of the equation. If there is a CEO evaluation every year, there is no question about the fact that feedback will be sought and provided. In contrast, a CEO may feel targeted if the board suddenly calls for the first CEO evaluation in years, especially if there is any dynamic issues or misalignment.

A Call to Action

Navigating the Board-CEO relationship effectively requires intentionality and collaboration.

• Reflect: What defines an effective Board-CEO relationship in your organization? What challenges have you faced, and how did you overcome them?
• Commit: What steps can you take to strengthen alignment and trust?

By tackling these questions head-on, boards and CEOs can lay the groundwork for a resilient partnership, shaping a sustainable future for their organizations.

[1] https://www.bizjournals.com/bizwomen/news/latest-news/2024/09/ceo-exits-record-high-job-market-cools.html

[2] Inc.com 2022, HBR 2014, 2016

[3] The first most cited reason was a bland “stepped down.”

[4] https://www.challengergray.com/blog/ceo-turnover-surges-to-234-june-2024-exits-add-to-highest-ytd-total-on-record/

[5] Exerchange 2019 based on the Russell 3000 index, using a pushout score approach

[6] https://chiefexecutive.net/the-costs-of-ceo-failure/ and underlying sources

[7] PwC 2019 study of the world’s 2,500 largest public companies