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CEOs Should Not Be On Their Company’s Board

CEOs Should Not Be On Their Company’s Board

For many companies, not only should CEOs not be the Chair of the Board, but ideally, they should not be on the company’s Board at all.  Public companies have been separating the CEO from the Chairman role for years and the trend will continue, not only because of regulatory pressure, but shareholder pressure as well.   I think, however, the CEO should not even be on the Board unless he/she is the major shareholder/owner or controls the majority of voting shares.  

If the company is private (not listed on any stock exchange, nor planning to go public), then there certainly are circumstances where it is reasonable, tolerable or even desirable to have the CEO be Chairman (when the CEO/Chairman is the sole owner of the company, for example).  But otherwise, even in a small private company, it serves no good purpose to have the CEO be on the Board, let alone Chairperson.   

A Board on which the CEO sits, will be unduly influenced by the CEO.  His/her presence will taint the Board’s independent judgement, skew their perspectives and limit the broad objective view they need to evaluate management performance.  The Board hires and fires the CEO; to have the CEO part of the group that serves that purpose is nonsensical.  Even if he/she removes themselves from certain discussions pertaining to their performance, just their membership in the Board ruins honest evaluation.  The smaller the board, the more the CEO’s presence ‘cools’ discussion about the company’s (and hence about his/her) performance.  This is often made even worse when CEOs who are on Boards have a hand (sometimes significant) in selecting other Board members (or approving them), so other Board members may feel beholden to the CEO on some level.  Again, this just taints the Board’s critically needed objectivity for evaluation of the management’s performance in achieving the company strategy and goals.

The Board should certainly have the CEO regularly attend Board meetings to present reports, be a resource and answer questions, but should not be a voting member.

I do not advocate removing a CEO from a Board, if the Board is truly operating well.  Do not break what is working!  But as a shareholder/owner or chairperson, take an honest look – just because wants the director title, does not mean that is the best move for your company.

Unless the CEO is the company founder and/or a majority shareholder, think hard before putting the CEO on your Board.

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