Board Leadership

Board Governance Depends on Where You Sit (McKinsey Quarterly Article)

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This article from the McKinsey Quarterly offers insight about how board leaders and independent directors may contribute to effective board governance, as well as the roles and responsibilities of individual directors. Particularly, whether a firm’s board is chaired by the CEO can affect the responsibilities of independent directors.

The author, William George, writes that he has served on ten corporate boards, and has also served as (a) chairman and CEO of Medtronics, (b) chairman of a board (without holding the CEO position) and (c) CEO of a company (without holding the chairman position).  Having served in these various roles, he highlights some of the challenges that may accompany each of the roles, and suggests how directors may contribute to boards from a variety of positions.  He also provides lessons learned from serving in the various roles. For example:

  • Independent directors face the challenge of staying fully informed about their companies.  George suggests that in addition to asking tough questions, independent directors have three particular opportunities to contribute – advocating for sound governance, ensuring an appropriate focus on management succession planning and leading in a crisis.
  • The CEO who does not serve as chairman faces several challenges, including confusion in the eyes of management, customers and shareholders about who is the real leader of the company, as well as confusion about whom board members should look to for strategic direction.  George suggests that the effectiveness of having a separate CEO and chairman depends on the relationship between the two individuals serving in these roles.
  • For a CEO who also serves as chairman, George suggests that he or she must keep the independent directors well informed, be mindful of the difference between the two roles during board deliberations and draw out the opinions of more reserved board members.  He also describes the benefits of the CEO/ Chairman collaborating with an effective lead director.
  • When the board has its former CEO as chairman, George suggests that the chairman must be effective in supporting the new CEO and avoid situations in which he or she may overshadow the new leader.  George also emphasizes the importance of having a well-defined job description for the chairman role.

After analyzing how board leaders may contribute from different positions, George suggests that there is no “one size fits all” formula for a board’s leadership structure. Rather, companies should carefully examine present and future leadership and should structure their boards to reflect interpersonal dynamics and relational synergies.  Most importantly, companies should remain open minded and adapt the board structure to support new leadership dynamics.

Board Governance Depends on Where You Sit, by William George, was published by McKinsey & Company in 2013 and is included in McKinsey’s “Insights and Publications.” Mr. George is a professor of management practice at the Harvard Business School and currently serves on the boards of ExxonMobil, Goldman Sachs, and the Mayo Clinic. McKinsey & Company is a global management consulting firm that works with leading organizations across the private, public, and social sectors. Additional information about McKinsey & Company is available on its website at www.mckinsey.com.