11 April 2019 by Nada Kakabadse
CEOs who attribute organisational success to themselves are missing the point that pushing an ‘I’ agenda in the boardroom rarely results in a winning strategy
Discretion is at the core of understanding that a chairman has the freedom to choose between, and can be influenced by, a wide variety of constraints, such as statutory law, agency rules, political, organisational and cultural realities, and professional and ethical standards.
However, for an insight into how these accepted norms can break down, consider how towards the end of last year Elon Musk, founder and CEO of Tesla, lost his chairmanship of the board and earned a $20m settlement with the Securities and Exchange Commission (SEC). All this followed a Tweet in which he stated: ‘Am considering taking Tesla private at $420. Funding secured.’ This was closely followed by: ‘Shareholders could either sell at 420 or hold shares & go private.’
These ill-advised messages sent shares soaring to an extraordinary high of $387.46. Deemed by the SEC to constitute securities fraud, his statements were untrue and he knew it, or at least he should have.
Had Musk exercised the wisdom normally associated with a chairmanship he would had prevented his CEO, in this case himself, from ever Tweeting such an ill-informed position.
Boards can prove easy targets for their critics. They can be attacked for the level of power they wield, for falling down on the job, and even for potentially disastrous interference in entire economies.
The number one question for both aspiring and existing board members is ‘do they really understand their organisation’s competitive advantage and how it should be positioned?’
Careful consideration should also be given to how board members interpret and deliver governance which enables an organisation to perform more effectively, while maintaining grounded ethical and moral positions in the marketplace.
This interplay between a chair’s wisdom and stewardship, and the power wielded by the CEO, is a subtle but invaluable exchange. Indeed, the importance of such interventions raises the question of whether ‘I’ is ever advisable, or even possible, at board level?
Senior executives as well as board directors base their decisions on several factors, including facts, personal values, organisational policies, legislation and a range of other stakeholder influences.
Exercising discretion in decision-making is an essential part of the senior executive’s playbook. CEOs expect to be called upon to use their judgement effectively many times in any given a day and how they make difficult decisions varies by context, cognitive makeup and individual style.
Executive decision-making is rarely automatic, even where there are corresponding policies or procedures in place. Executives tend to guide themselves through situations where there are no obvious answers by seeking counsel from colleagues or mentors, or by drawing on their own values. Others are guided by social norms, or alternatively bend expectations learnt from numerous corporate scandals.
Nearly all top team members employ discretion. Executives who possess a clear moral compass and high political sensibility know how to use discretion to make decisions which have positive consequences, and avoid delivering outcomes that produce negative results.
Despite this, a select few break rules without compunction. Emotions, biases or other political influences impact their decisions, which in turn reveal injustices and imperfections in the choices they make. In our studies of leadership across 16 countries, we have been confronted with CEOs who attribute all of their organisation’s successes to themselves. A common theme is ‘I grew this business,’ or ‘I turned this company around,’ or ‘when I became the CEO, I started to launch programmes in the area of environmental sustainability.’ Most significant is the use of the personal pronoun ‘I,’ which has been predominant in all of our conversations.
To the uninitiated, the remaining view is that one person alone has done all of the work in the organisation. When we asked these CEOs to explain what their top team colleagues had been doing, the reply was often along the lines of ‘I’m ultimately responsible for this entity,’ or ‘the buck stops with me.’ Only rarely did a CEO give credit to their senor colleagues, or acknowledge the work and achievements of other employees.
Of particular interest was that CEOs predominantly became comfortable using the term ‘we’ when confronted with negative consequences, such as ‘we had overcharged customers in previous years by millions. We had to ask ourselves - what do we do now?’
It is unclear whether the use of ‘I’ was a reflection of the discretionary nature of the CEO’s role, or of the role’s incumbent ego. Often the two become intermingled to the point of being indistinguishable.
Board decisions ultimately impact on organisational strategy, and the success of a business in turn relies on shareholder value. Moreover, boardroom decisions carry legal responsibilities. The director’s duty is to exercise independent judgment, taking into account advice received and considered in order to promote the success of the company.
On the rare occasions we encountered directors who had acted to remove underperforming CEOs or chairs, it became apparent that a significant cause was that the challenge of ‘I’ had arisen in the boardroom. ‘I don’t take lightly removing a CEO, firing any CEO but because the value of having a positive impact is much more important to me than any one individual I have to do it.’
During our international studies into boardroom dynamics it was surprising that ‘I’ was rarely used as a precursor of success. When non-executive directors and chairs we interviewed did take credit for successful outcomes the most common language would be, ‘the boards that I sit on have made…, ‘or ‘on the board I chair, we have introduced…’
The chair has to convene and lead all board meetings and achieve consensus among directors. If they express their view in the boardroom on a specific question, or on the general direction of the organisation first, they can close the conversation quickly.
Decisions are made by majority vote at board meetings, or by all directors signing a written resolution. This leaves very little room for ‘I did this…’ mantra or system of governance.
Ultimately boards have to deal with individual sets of circumstances and, no matter how much procedural governance is put in place, each organisation should be treated as a unique entity.
That said, we are now seeing a widespread move away from traditional forms of governance and leadership models in which the CEO or chair exercises authority, control and makes most strategic decisions without soliciting advice, feedback or participation from others in the organisation.
A more collaborative model of distributed leadership is emerging, made all the more relevant when tasks are complex and individuals are highly dependent upon one another. This approach exploits a diversity of perspectives and wealth of experience, strengths and the overarching potential that exists within most organisations.
‘Collaborative leadership’ is about trust and the heightened quality of interaction that takes place when there is a shared sense of responsibility for the success of an organisation, rather than a limited focus on the formal positions of selective individuals.