Why are Boards barely mentioned in the literature when talking about leadership in any form?
One of the most important roles of the Board, in addition to their fiduciary responsibility—or as a part of their fiduciary responsibility — is to ensure the organization has a strategy that provides for the long term viability of the organization and that the underpinnings of the foundation are a set of values that reflect an ethical and moral organization
Based on a survey of 1,450 executives from 12 global corporations, among the 21 crucial competencies they identified as important for global leaders were “ability to articulate a tangible vision, values and strategy.” (Ireland & Hitt, 1999, p. 48) How is that vision, those values and that strategy determined and how is it measured? Does the CEO do it alone without input or accountability? Does the CEO just have a Board that “rubber stamps” their vision, strategy, values without taking into consideration the purpose of the organization?
Rowe talks about different leadership styles in his article on “Creating wealth in organizations: The role of strategic leadership”. (Rowe, 2001) In this article he talks about the managerial leader, the visionary leader and the strategic leader:
- The managerial leader thinks narrowly and maintains the status quo, this may bode well for the organization in the short term but can be lethal in the long term.
- The visionary leader thinks broadly, often uninvolved in the nuts and bolts of the business, and can go in tangents in order to get to the future, those tangents can potentially create disaster for an organization if the vision turns out to be wrong.
- The strategic leader, who meshes a little bit of both of these styles and moderates them, is considered by Rowe the type of leader that can create wealth in organizations.
But, with each of these styles, where is there mention of the role of the Board? If the strategic leader has vision, and understands operations and ensures fiscal stability, how do we know that strategic leader is doing the right thing for the company and its long term future? Who asks those questions and who holds them accountable? Can the CEO be a strategic leader, who creates wealth, but who also creates their own “personal fiefdom” by strategically leading their companies for their own particular purpose? (Grant, 2010, p. 427) Examples of this have been well documented, Enron, WorldCom, Tyco, etc. Where was the Board and why did they allow the vision, strategy and values of these CEO’s to continue?
I would venture to suggest that the Board plays a critical role in the strategic leadership of the organization and in ensuring its long term viability. According to OECD Principles of Corporate Governance, the Board has the responsibility to “ensure the strategic guidance of the company….” (Grant, 2010, p. 428)The purpose of the Board in both privately held and publicly traded companies, is not to just ensure return on investment for shareholders (that can happen with strategic leadership that is not committed to the right strategy, vision and values) but also to provide strategic leadership to the C Suite (CEO, CFO, CMO, etc.) and holding those leaders accountable to a high standard of performance that benefits the organization in the long term. In fact, I think the Board needs to run interference between the CEO and the shareholders when the strategy is right but it requires time to demonstrate to shareholders the value of that strategy.
What do you think?
Barbara is the president of Fahey Associates, Inc., a healthcare executive search and management consulting firm. She was the chair of the Board of Trustees of Holy Cross Hospital in Chicago and is currently the chair of the Board Quality Committee and co-chair of the board subcommittee on quality and finance. She is a student in the doctoral program at Benedictine University’s Center for Values-Driven Leadership.
Grant, R. M. (2010). Contemporary Strategy Analysis(7th Edition ed.). Chichester, West Sussex, United Kingdom: John Wiley & Sons, Ltd.
Ireland, R. D., & Hitt, M. A. (1999). Achieving and maintaining strategic competiteveness in the 21st century:The role of strategic leadership. Academy of Management Executive, 43-57.
Rowe, W. G. (2001). Creating wealth in organizations: The role of strategic leadership. Academy of Managment Executive, 81-94.