Vice Chairman, Co-Leader, Board Services
This Week in Leadership (July 19 - July 25)
What the Delta variant means for office returns. Solving the labor shortage with returnships. Plus, tips for how to be a great board director.
Dennis Carey and Robert Hallagan are Korn Ferry vice chairmen and co-leaders of the firm’s Board Services practice.
It’s the kind of figure that gets attention—for the first time, more than 50% of the S&P 500 firms have separate CEOs and board chairpersons. But as milestones go, this one may be misleading.
Major pension funds and activists have been pushing for this movement, believing the separation of titles leads to enhanced shareholder value. That’s not something we’ve found any documented analysis on. What we have observed—and what matters most here—is that there are two key pillars that do correlate to long-term shareholder value: an exceptional CEO and exceptional independent board leadership.
Strong, independent board leadership can take the form of a lead director as well as a non-executive chairman, whichever is best for the company’s situation. For instance, separating the roles could put the CEO of a multinational corporation at a disadvantage when dealing with political leaders, peers, and major customers outside the United States. And, in many cases, having the board chairperson be someone other than the current CEO doesn’t automatically create an independent board leader, because the role often is given to the company’s recently retired CEO. We think that if a lead director’s responsibility is defined properly, it should be indistinguishable from a non-executive chair.
Finding Independent Board Leadership
There are now well-established CEO succession processes, assessment tools, and research that help a board ensure it has the “right CEO at the right time.” Board leadership needs the same thoughtful, disciplined approach. Exceptional independent board leadership is not achieved by accident, and ineffective board leadership can destroy value. Choosing the right person for a board leader role—whether it’s as a lead director or as board chair—first requires determining the most critical and toughest challenges the company may face over the next three to five years. Will there be a CEO succession? What’s the likelihood of an activist stakeholder arriving on the scene who will want to deal directly with a lead director? Is there a need to enhance the board’s effectiveness or refresh the board’s membership? Does the company need a strategy transformation? These types of challenges are complex and require a high level of leadership competency. Not all board members would make exceptional board leaders and, unfortunately, the individuals that raise their hands the highest and politic for the position usually are the wrong choice.
In our experience, the qualities and competencies of an effective independent board leader include:
What’s Next for Your Board?
If we can all agree that exceptional independent board leadership is the key driver for success, and if we can also agree that it takes an exceptional leader to achieve, then we leave you with these questions: