For boards, currency is the new currency
By Wanmay Ang, Ayse Guclu Onur and Greig Schneider
Egon Zehnder recently asked 1,235 global CEOs who they turn to in order to make sense of the challenges ahead. Not surprisingly, 75% responded “my senior leadership team.” What was more surprising was that 43% said they turned to “other CEOs” (43%)—and only 23% of these chief executives, who span industries and ownership structures, said they turned to their board chair.
This data raises three important questions: Why did board chairs rank so low? Why did other CEOs rank so high? And what are the implications for boards?
Why the Chair is Often an Underused Resource
One of the reasons CEOs may be less likely to turn to their chair lies in the complexity of their relationship. Even though it’s the chair’s job to provide advice and counsel, they also lead the group to whom the CEO reports, so CEOs may be naturally reluctant to show vulnerability.
That said, if the relationship can be constructed correctly, the chair has the potential to be a valuable resource.
Too often, when trying to create a “healthy tension” in their relationship, CEOs and chairs dive directly into what needs doing, instead of establishing appropriate rules of engagement, as Egon Zehnder Partner Marc Erzberger has written. He recommends that CEOs and chairs take the time to focus on how they work together. In a recent HBR article, leadership guru Michael Watkins recommends CEOs and chairs clearly define roles and responsibilities— including which decisions necessitate a conversation—as well as explicitly discussing working styles (e.g., how does each party like to receive information) and communication protocols (e.g., how often to speak). This upfront investment can enable a more productive partnership in which the CEO trusts that the chair can be a resource and a guide.
The Value of Currency
While the relationship between the chair and CEO will always require balance, perhaps the more interesting finding is the value of the advice of sitting CEOs. This data confirmed what we at Egon Zehnder have been seeing in our work placing board members across the world: a definitive increase in the demand for sitting CEOs as board members.
Given today’s pace of change, this makes perfect sense. CEOs are facing a level of complexity never before experienced. The challenges of geopolitical instability, economic uncertainty, and the adoption and impact of AI all combine to make the CEO role substantially more complex. The value of a retired board member who is no longer in the flow can provide is dropping. Simply put, as today’s leaders seek to navigate truly uncharted waters, they need help from advisors who are also swimming in those waters.
This creates a challenge for boards: How do they stay sufficiently current to provide the organization with the needed guidance? There are three levers a board can pull.
1. Upskill current board members through enhanced board education. Well-functioning boards invest in educating themselves on issues important to the organizations they are governing. This often includes site visits to company headquarters and production facilities to more deeply understand operations, visiting “guest lecturers,” and various other forms of training. The value of ongoing education may seem obvious—it’s even mandated for NYSE companies—but many boards take this responsibility too lightly.Staying abreast of current challenges and technology trends is going to take more investment in time, money, and attention, if boards are to fulfill their roles. Chairs should take steps to ensure such education is appropriately prioritized.
2. Engage expert advisors on specific topics. It’s generally not a good idea to use a valuable board seat on someone who will only be able to engage in one specific area (e.g., AI). Instead, boards should seek formal relationships with experts who can advise them on such topics and shore up areas where the group has less experience.
3. Recruit and integrate current executives to the board. This brings us back to the demand for sitting CEOs (and other C-suite executives with appropriately broad experience) to serve on boards. Recruiting such executives can be a challenge, as they typically only have capacity for one board beyond their own, but such leaders can inject invaluable insights and serve as useful thought partners.
These options are not mutually exclusive. Recruiting a sitting C-suite executive does not absolve board members from educating themselves, and boards may benefit from both new blood and expert advisors.
As they consider how best to stay current, boards should take a hard look at another root cause: tenure. The current average tenure of a Fortune 500 board member is about 7.8 years, and has been dropping, according to NACD.
NACD’s study, conducted with Alvarez & Marsal, found that Fortune 500 companies with somewhat longer average board tenures tended to do better—with a caveat: They also found that having a range of tenures was important. “Regularly updating who serves on the board, while still retaining experienced members, contributes to better performance,” the report found. As the pace of change continues to accelerate, we expect that the need to refresh will remain, while the average tenure will drop.
One Way or Another, Boards Need to Stay Relevant
The complexity and difficulty of the CEO role has continued to increase, and consequently CEOs need more support than ever. Of course they will leverage their teams, and fellow CEOs will continue to provide fellowship and counsel.
But boards—and most importantly their chairs—need to do more. By taking intentional steps to stay current—through education, advisors, and more regular board refresh (exiting board members who are unable to sufficiently contribute and adding members with fresh perspectives)—boards will help today’s leaders to find the best path forward.
Wanmay Ang is Managing Partner for Egon Zehnder in Singapore, focusing on C-suite and board succession.
Ayse Guclu Onur, based in New York, is a partner with Egon Zehnder, active in advising boards and CEOs in the Financial Services Industry.
Greig Schneider, based in Boston, is a partner and former leader of Egon Zehnder’s Global Leadership Advisory Practice.