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    Redraw The Line Between The Board and The CEO: John C. Smile

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    The document discusses perspectives from five professionals on the relationship between boards of directors and CEOs. John C. Smile believes boards should have a clear majority of outside directors and that independent directors should select a lead director, meet alone, and take responsibility for board procedures. Alan J. Patricof stresses the importance of independent boards and suggests increasing director stakes through compensation. Denys Henderson notes the trend of separating board chair and CEO roles. Bernard Marcus advocates for activist directors to get first-hand information from customers and employees. David W. Johnson argues that increased accountability should be viewed positively and that task division should be clinical.

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    Redraw The Line Between The Board and The CEO: John C. Smile

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    noman
    164 views3 pages
    The document discusses perspectives from five professionals on the relationship between boards of directors and CEOs. John C. Smile believes boards should have a clear majority of outside directors and that independent directors should select a lead director, meet alone, and take responsibility for board procedures. Alan J. Patricof stresses the importance of independent boards and suggests increasing director stakes through compensation. Denys Henderson notes the trend of separating board chair and CEO roles. Bernard Marcus advocates for activist directors to get first-hand information from customers and employees. David W. Johnson argues that increased accountability should be viewed positively and that task division should be clinical.

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    The document discusses perspectives from five professionals on the relationship between boards of directors and CEOs. John C. Smile believes boards should have a clear majority of outside directors and that independent directors should select a lead director, meet alone, and take responsibility for board procedures. Alan J. Patricof stresses the importance of independent boards and suggests increasing director stakes through compensation. Denys Henderson notes the trend of separating board chair and CEO roles. Bernard Marcus advocates for activist directors to get first-hand information from customers and employees. David W. Johnson argues that increased accountability should be viewed positively and that task division should be clinical.

    Copyright:

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    Download as docx, pdf, or txt
    164 views3 pages

    Redraw The Line Between The Board and The CEO: John C. Smile

    Uploaded by

    noman
    The document discusses perspectives from five professionals on the relationship between boards of directors and CEOs. John C. Smile believes boards should have a clear majority of outside directors and that independent directors should select a lead director, meet alone, and take responsibility for board procedures. Alan J. Patricof stresses the importance of independent boards and suggests increasing director stakes through compensation. Denys Henderson notes the trend of separating board chair and CEO roles. Bernard Marcus advocates for activist directors to get first-hand information from customers and employees. David W. Johnson argues that increased accountability should be viewed positively and that task division should be clinical.

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    of 3

    Redraw the line between the board and the CEO

    Empowered boards are the need of hour for any organization in present business dynamics. The
    management is becoming more accountable to the shareholders and the board is being dominated
    by the outside directors. However, this situation leaves us with many other questions regarding
    the relationship between the board and the CEO of an organization. To what extent outside
    directors play their part I formulating the strategy for a company? When and how can outside
    directors bypass the CEO? How can directors evaluate CEO?

    This document summarises the responses of five professionals who somehow worked out the
    answers to above questions and have their own perspective along with their organizations
    perspective of the relationship between board and the CEO.

    John C. Smile

    He is the non executive chairman of board of GMC and believes that although corporate
    governance is now a necessity for ay public organization but their guideline are neither universal
    nor are the eternal. The foremost responsibility of any board is to serve the interests of the
    owners. The functionality of the board is enhanced when independent and outside directors are
    included in board of directors. This act removes any chances of cultural bias which could have
    come from within the organization. Out of many few examples are illustrated below:

    1- There should be a clear majority of outside directors:


    Apart from the CEO every other member of the board in GM is supposed to be
    independent. This helps the organization’s management to be scrutinized properly.

    2- The independent directors select a lead directors:


    The lead director can be the chairman of the committee formed by the board, in case the
    chairman of the board is CEO. He must be the first one amongst equals and has the
    responsibilities of presiding the meeting and preparing the agenda.

    3- Independent directors should meet alone:


    Apart from the scheduled meetings which are twice or thrice per year it is highly
    recommended for the independent directors to meet each other in absence of CEO. This
    can provide them with the opportunity to discuss the subject matter more thoroughly
    without any pressure.

    4- Independent directors should take responsibility of all the procedures:


    The size and structure of the board committee has to be decided by the board along with
    its policies and regulations.
    Alan J. Patricof

    He himself is a venture capitalist and believes that the existence a strong independent board is
    imperative for an organizational growth. In his opinion a strong and self confident CEO is not
    self centered and is inclusive in nature. This allows the board to make certain decisions or at least
    direct CEO to make decisions without being intimidated by management. Giving the example of
    compensation committee, Alan suggested that one of the most daunting task for a board is to
    discuss CEO’s salary. For such critical issues it is advisable to form committee including
    individuals possessing skills pertinent to that task. Moreover, independent and outside
    consultants cannot be pressurised by the management and will feel autonomous to give objective
    advice. Liaison between the directors and management is critical in order to ensure the smooth
    running operations of a company hence, special trainings must be given to management under
    CEO to work with outside directors, moreover, there must an internal audit report which must be
    presented to outside directors for external audit. In order to remove issues like agency problem,
    stakes of directors in the firm are increased via compensation through stock options. However,
    this act can lead to steps which may glorify the books in short term compromising long term
    growth of company.

    Denys Henderson

    He pointed out the growing trend separating the job of board’s chairman and CEO in USA. The
    non executive director is expected to be an outsider who obviously is alien to environment within
    the company. This rather is a blessing in disguise as it prevents the outsider to poke into CEO’s
    job. With that said, the non executive chairman has it binding himself to observe how the
    management is working. Their major responsibility is monitoring hence, by knowing their
    boundaries directors can help creating a progressive and well coordinated relationship with the
    CEO.

    Bernard Marcus

    He is the chairman of Home Depot and a firm believer of activist directors on board. As a
    chairman he informed that the management used to share its success and failures with the board.
    However, outside directors are rather expected to move into the stores and get a first hand
    information from the customers and employees who according to Bernard were major
    stakeholders of the company. Many companies make a mistake by appointing directors based on
    social issues. This is not a right move because director’s job is sometimes extremely technical in
    nature therefore skill set must be a primary decider. Moreover, an outsider must built his own
    stakes in the company to ensure he works for the progress of shareholder however, its drawback
    has already been mentioned above.
    David W. Johnson

    With the increase in free trade, responsibilities and competition amongst the business have also
    heightened. This phenomenon has lead to the greater deal of accountability of the directors at the
    hands of owners. Now it is upon the management and the directors to see this process of
    accountability as constructive and positive rather than considering it as menace. On the other
    hand CEO and owners must try to be more inclusive in nature and must carry out the task
    division in a clinical way. They must show that their intention is to net the fabric of the company
    in friendly and progressive way where each individual knows his task so that their skill sets are
    built according to the task in hand

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