What do you do with an expanding young company, led by a visionary founder, when the time comes to replace that visionary with a CEO who has an eye on the “bottom line?”
This and other knotty interpersonal issues, which arise quite commonly in board governance, were explored at the May 12th Boston breakfast meeting of the National Association of Corporate Directors-New England Chapter, by a panel of experienced directors who have served on public and private boards.
Boards may be unskilled in reaching the decision to replace a founding CEO. Particularly in technology-driven companies, boards often are not fully tech-savvy. Then there is the matter of timing; when does the vision become less important than the bottom line?
The panel agreed that the ability of a CEO to impart leadership is more important than the bottom line, because the bottom line will follow good leaders. But you cannot tell if someone is a good leader just by attending a board meeting; it is necessary for the effective director to learn about the company by meeting its personnel, having direct reports to the CEO attend some or all board meetings, and educating yourself to understand the industry in which your company functions.
Terry Carleton, a board member of Demoulas and chair and thereafter president of Bentley University (among other numerous board assignments), added that when you have a board issue of replacing a CEO, this goes hand and hand with the strategic question of where the business is situated. Should you go out of business, sell out, look for a change in leadership? Changing the CEO may be a matter of changing the vision for the business, and that involves evaluating the nature of that vision and the way in which the company fits into emerging marketplaces.
Should the CEO also be the chair of the board? There was unanimous agreement that there are two entirely different jobs and should be separated (although it is difficult sometimes to convince a long-tenured CEO-chairman to step down from the of chair).
What about a fixed retirement age? There seemed to be consensus that a fixed retirement age for a public company is appropriate, although the board will sometimes waive that requirement for people with great skills or institutional knowledge. One panelist observed that although wisdom may reside in senior directors, it is foolish to assume that there aren’t a very large number of competent younger people. No one seemed in favor of a mandatory retirement age for privately held companies.
Finally, it was noted that “older people” are often well-connected, and have robust networks which you can tap to help solve problems quickly, a benefit perhaps not shared by shorter-tenure directors.