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From Rio Tinto and Novo Nordisk to Stellantis and Unilever, this year a steady stream of European-listed companies have announced the abrupt exits of their chief executives as tensions with their boards spill out into the open.
On paper, boards are doing their jobs. Faced with geopolitical upheaval, economic volatility and technological disruption, they are stepping in earlier, intervening faster and showing less tolerance for underperformance.
Korn Ferry found that half of all CEO successions in Europe and the Middle East last year were unplanned — up from 43 per cent the year before. Dissatisfaction with strategy execution and the pace of performance improvement were the most common triggers.
But the gripe is not one-sided. “I was surprised at how ill-informed the board is,” one newly installed multinational chief executive told me recently. “Where is the expertise?” It’s a view top executives echo repeatedly about their overseers — that those charged with providing oversight aren’t necessarily equipped to offer guidance for this fast-changing environment. Spencer Stuart’s latest Measure of Leadership survey of 2,400 CEOs and directors found that fewer than a quarter of chief executives feel their boards are supporting them effectively in today’s environment.
Historically, in Europe, boards were more passive. But over recent years, corporate scandals, a push to professionalise the boardroom and more volatility in the operating conditions of companies have spurred more boards to change their approach.
“Noses in, fingers out” has been the traditional boardroom motto. But today, says veteran director and adviser Michael Montelongo, directors are “more alert and involved than they ever have been”.
Directors are expected to act as strategic partners — offering judgment on emerging geopolitical risks, tech adoption and long-term opportunities. This sounds good in theory, but often falls short.
Sometimes it’s a matter of approach. Too much challenge by the board can alienate. So can too much well-intentioned support. The tension fundamentally lies in a board’s need for sufficient transparency and information flow so they can adequately probe while a CEO often just wants to be left alone.
A survey from Board Intelligence, based on FTSE 100 board evaluations, also found directors are often mired in operational minutiae, disengaged from innovation, and unclear on their strategic mandate. The accusation is that UK boards obsess over risk mitigation and compliance over discussing matters that could be transformational for a company’s future. Hans-Christoph Hirt, an adviser, says: “Boards are trying harder, but they don’t always get it right.”
Executive teams are not blameless. Many boards can only respond to what they are told — and CEOs have long mastered the fine art of massaging the message. Board papers are expertly curated, risks are reframed and language is carefully chosen. If the right questions aren’t asked, the real issues obviously go unnoticed.
The result is increasingly a brittle dynamic built on mismatched expectations over what good looks like and often a deficit of trust, which leads to more antagonistic interactions. Trust, like performance, is easier to lose than build.
Improving the knowledge base of directors could help. Experience in the current environment dates fast and learning curves can be steep amid technological advances and shifting geopolitical alliances. The work outside of the boardroom is important too — from cultivating informal relationships, engaging in site visits and even scrutinising Glassdoor employee ratings of companies.
The structure of boardroom interaction also deserves scrutiny. In the UK, agendas tend to prioritise compliance and governance matters over growth and future challenges. Pippa Begg of Board Intelligence says annual boardroom effectiveness assessments put greater emphasis on backward looking metrics. “The construct, habit and convention around the timetable and agenda . . . gets in the way of the conversations we want to have,” says Begg.
Research by Sam Garg, professor of management at ESSEC Business School, finds chief executives try to allay suspicion by communicating more. Yet when and how they interact with directors matters more than volume as they might unwittingly undermine their own authority
The CEO-board relationship can make or break a company. One UK chair told me: “My CEO knows my job is to help him succeed, that is the starting point.” If that is clear, it can open the door more to the candour and challenge required to steer a company through current turbulent times.