Welcome to the June 2014 edition of The Director’s Dilemma. To read this email in your browser, go to www.mclellan.com.au/newsletter.html and click on ‘read the latest issue’.
The crux of this month’s dilemma is the balance between independent and executive roles on the board. Different stakeholders will have differing views about how best to structure a board. When leadership of the board is combined with executive power the governance structures and processes must change from the more usual independent model to accommodate and manage the structural and emotional relationships between the parties.
Consider: What would you advise a friend to do under these circumstances?
Hakeem had a distinguished career culminating in successive CEO roles; he managed the largest national company in his industry and then turned around the domestic operations of a major international company. He was welcomed onto boards where he displayed skills which eventually led to his appointment as director and then chairman of a struggling company in an industry where his background added particular value. As part of his role he chaired the nominations committee.
Things did not go well for that company and, after a failed attempt at a turnaround, the CEO resigned. Hakeem started a professional search for a new CEO. Whilst the search continued Hakeem became Acting CEO and executive chairman.
After a few months he found himself enjoying the challenge of hands-on management and leadership of an executive team. He didn’t realise how much he had missed executive life. Soon he discovered that he was not happy to relinquish the executive role and discussed with his fellow directors the possibility of his staying on as CEO and their finding a new chairman.
His colleagues were delighted. The search had been slow and had not produced any good applicants; possibly due to the prior poor corporate performance. The company was starting to show signs of improvement under Hakeem’s management and they all thought he would make a great CEO.
The Company Secretary was concerned about the governance implications and, after discussing the proposal with some of the institutional investors, informed the board that they had some objections to the plan.
How should Hakeem proceed?