Boardroom QA: When the Founder and CEO Clash
BY Ralph Ward
Q:I'm an outside director of an established company with a growing governance problem. The company founder (and board chairman) is working toward retirement, and awhile back we hired a new chief executive officer from the outside. Our board doesn't have any serious issues with the CEO's job, but the founder/board chairman increasingly second-guesses him. Meanwhile, our CEO is getting tired of the founder's unwillingness to cede power and is growing more abrupt with him. Is there some way our board can defuse this feud before it explodes?
A: Richard Hagburg, a California-based consultant who specializes in succession issues, was recently called in on a similar situation. " There was a real breakdown between the founder of the company and the new CEO. They were the opposite in style - the founder was an evangelistic, entrepreneurial type, while the new CEO was a real manager, the tactical, disciplined sort both the founder and the other board members thought the company needed. But now the two of them weren' t getting along.
" The board saw that the conflict was one of style and expectations, and they thought the founder and chair was wrong - the new CEO was doing what was needed - so the board called us in. We did evaluations and found that the CEO was an above average manager, but there were some problems with his style. Also, one of the directors took the chair aside and told him that he was stepping over the line. The chair realized that there was a problem and wanted what was best for the company. The board then more closely defined the roles of the chair versus the CEO. We discussed these roles with the two, and this helped to clear the air."
While Hagburg' s example shows that outside help can be of real benefit in such a clash, it also shows how vital a strong board with an independent voice is. The directors could simply give in to an imperial founder and push out the CEO, or (in rarer cases) stick with their executive and battle with the chair over control. But this board showed that leadership needed to talk tough with both sides - and to shape a solution that benefited everyone.
Adapted from an article in the November 1999 issue of Ralph Ward's Boardroom INSIDER.