The CEO's Boss

The CEO's Boss: Tough Love in the Boardroom

WILLIAM M. KLEPPER
Copyright Date: 2010
Pages: 192
https://www.jstor.org/stable/10.7312/klep14988
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  • Book Info
    The CEO's Boss
    Book Description:

    In order to avoid another Enron, WorldCom, or Tyco, company directors have assumed a bold and independent role in the boardroom, monitoring the actions and day-to-day operations of the CEO. This dramatic shift has created a new dynamic, one that requires careful negotiation from both parties to get the job done. Giving directors, executives, investors, and stakeholders the tools to make this relationship work, William M. Klepper describes the best techniques for building a productive partnership and establishing a plan of action for a variety of businesses and settings.

    Klepper, an executive educator, has worked with AT&T, Bausch & Lomb, Johnson & Johnson, Sony, Sun Microsystems, and a host of other corporations. He knows what makes a healthy partnership between a board and its CEO and the consequences of a bad fit. In this book, he details the eight practices of successful executives, such as facilitating innovation, motivating change, and developing leadership skills, and he explains what directors need to evaluate, such as working style, social behavior, and the handling of stress, before they commit to hiring a CEO.

    The most critical element is the social contract, in which directors and their CEOs agree to be transparent, continually reassess their company's risk, maintain core company values, and make a commitment to their stakeholders. These include employees, shareholders, customers, and the community. In this essential volume, Klepper encourages directors to embrace their independence, and he teaches executives to value tough love.

    eISBN: 978-0-231-52063-8
    Subjects: Business, Management & Organizational Behavior

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. ACKNOWLEDGMENTS
    (pp. ix-xii)
  4. 1 The Social Contract
    (pp. 1-13)

    Directors and CEO’s alike are entrusted with remarkable responsibilities. The key to the successful leadership of a company is a strong partnership between these two parties. With the collapse of the housing market and the bankruptcy of such giants as Lehman Brothers and General Motors, the importance of this relationship has come sharply into focus, and it has become increasingly clear that CEO’s cannot be held solely accountable for failures such as these. When the news of Lehman’s demise broke, for instance, the question raised by the Wall Street Journal was, “Where was Lehman’s board?” It noted, “As the world...

  5. 2 Tough Love in the Boardroom
    (pp. 14-29)

    In a successful partnership between the CEO and the board, the directors are able to assert their independence and challenge the CEO’s assumptions when necessary. In the Lehman Brothers collapse it is clear that the board failed to sternly challenge Richard Fuld’s assertions about the state of the business. In retrospect, he was certainly not on mission: “We are one firm, defined by our unwavering commitment to our clients, our shareholders, and each other. Our mission is to build unrivaled partnerships with and value for our clients, through the knowledge, creativity, and dedication of our people, leading to superior returns...

  6. 3 Why the Right Partnership Matters
    (pp. 30-44)

    In the opening chapter, the Social Contract—a clear set of behavioral statements willingly subscribed to by the board and CEO—was prescribed to strengthen and maintain the partnership between these parties. In chapter 2, tough love was presented as a requirement to make this partnership work. These two elements are crucial to a company’s survival. Every board needs to face the reality that business cycles are unavoidable and uncertain, and the board and CEO must be willing to work collectively to meet the challenge of changing conditions—points of inflection.

    As was depicted in table 2.1, each stage of...

  7. 4 Leadership Metrics
    (pp. 45-57)

    As I discussed in chapter 3, each stage on the “S” curve demands a different set of leadership behaviors of the CEO. To gain a complete measure of what matters and what works in their partnership with the CEO, board directors need to go beyond the hard metrics of business performance [return on assets (ROA), return on equity (ROE), return on investment (ROI), and so on] to the soft metrics of a CEO’s leadership. “Soft metrics” is a term for intangible indicators used to value a start-up company, but the definition has been expanded to apply to business in general...

  8. 5 How the Partnership Can Go Wrong: TTWO
    (pp. 58-68)

    Take Two Interactive (TTWO) provides an informative example of a failed partnership between the CEO founder, a 21-year-old genius, and the board. This case was brought to my attention by a fellow business professor at Columbia, David Beim, who developed it and handed it over to me for presentation at a series of Outstanding Directors Exchange (ODX) meetings in New York, Chicago, and San Francisco in 2007. More than just illustrating a failure in the partnership and Social Contract between a board and its CEO, the TTWO case study gives us an opportunity to examine the interdependence of business cycles...

  9. 6 What Directors Need to Know Before Committing to a CEO
    (pp. 69-87)

    There are extraordinary circumstances under which it is difficult to conduct an impartial and thorough search for a CEO. At Coke, for instance, the sudden death of Goizueta forced the board to make a hasty decision about the successor, and it chose the Number Two in command without much discussion. At TTWO and JetBlue, on the other hand, the CEO’s were also the founders of the companies. These circumstances did not allow for a deliberate approach to the process of committing to a new CEO. However, in ordinary circumstances, there are a few things boards should be sure of before...

  10. 7 The Board’s Commitment to the CEO
    (pp. 88-101)

    Having discussed many things that go into a successful relationship between the board and its CEO, I should reiterate the importance of the Social Contract as the first tool to reach for from the partnership toolbox when building commitment with your CEO. The goal of the Social Contract is to ensure reciprocity in the relationship between the board and the CEO and to foster a partnership that is based on a mutual commitment to a set of behaviors central to their work:

    Commitment to values: A leadership credo that answers the question, “What do we stand for as an organization?”...

  11. 8 Effective Board Dynamics: How Directors Interact as a Team
    (pp. 102-122)

    The group dynamics of the board depend on the stage of the board’s development, the mix of its members’ styles, and the leadership behavior and roles directors employ. Effective board dynamics optimize the conditions for a successful partnership between external and internal directors in the boardroom.

    Bruce Tuckman’s model explains that as the team develops maturity and ability, relationships are established between members and the leader changes leadership style.¹

    Forming. High dependence on leader for guidance and direction. Little agreement on team aims other than those received from leader.

    Storming. Decisions don’t come easily within group. Team members vie for...

  12. Epilogue: 2020 Foresight
    (pp. 123-128)

    If business marketing à la “Mad Men” was king in the 1950s and 1960s, and finance ruled the second half of the century, then the failures of Enron, WorldCom, Global Crossing, Tyco, Adelphia, and Rite Aid have made corporate governance the major concern of the new millennium. With the current economic crisis has come a crisis of confidence in corporate governance, which is facing scrutiny and, as a consequence, inevitable change. As we reach the end of a tumultuous decade, a natural question is, “What will the next de cade bring?”

    In 2002, the NYSE and NASDAQ Corporate Accountability and...

  13. NOTES
    (pp. 129-134)
  14. INDEX
    (pp. 135-140)