Overly intrusive board is CEO’s worst nightmare

“WHERE does board responsibility end and executive responsibility begin?” is a question often posed by chief executive officers and other C-suite executives who are immobilised in their decision making like ‘rabbits caught in the headlights’ due to lack of decision definition.

- By Ronnie Peiris

They even fail to exercise their legitimate decision rights. This can be very costly in today’s dynamic corporate and business world where timely action is the difference between success and failure and ‘good’ and ‘excellent’. Having participated on both sides of the ‘line’, one as a member of the board and the other as an executive, and on the ‘line’ itself as an executive on the board, over long periods, I am well placed to respond to the primary question and make related comments and observations.

Tension between the board and management originates primarily from the board’s role as the monitor of agency issues between investors and managers. The board is the proxy of the investors in ensuring that management acts in the best interest of the company, shareholders and other stakeholders. Tension between the board and management is also born out of the increasing pressure which corporate boards face today because of the ever evolving, and at times excessive, regulatory requirements, enhanced investor expectations, closer investor scrutiny, complex risks emerging out of greater interconnectedness, cybersecurity threats and the essentiality of balancing short-term performance with long-term strategic goals. Furthermore, performance scrutiny and evaluation have assumed new dimensions with investors jostling to allocate their resources among different alternatives in seeking the biggest bang for their buck and executives taking ‘unauthorised risks’ in attempting to earn lucrative performance-based bonuses and incentives.