‘Lone-Insider’ Corporate Boards Come with Problems
When constructing their corporate boards, companies today have been increasingly embracing the “lone-insider” model, with the CEO as the only employee of the business with a board seat.
The Wall Street Journal recently noted that despite the popularity of this approach and the perceived benefits of independence, there are common problems with such an arrangement. (May 16, Combs and Ketchen)
Following exchange rules changes that forced companies to find more than half of their directors outside their own payrolls, organizations began taking the concept to the extreme, equating more independent voices with better operations. However, this model can rob the board of details and perspective that only insiders have access to.
Furthermore, when the CEO is the lone representative of the company’s leadership on the board, that executive can set the narrative. It’s not unusual for a CEO to dodge scrutiny or take undue credit when acting as the only corporate employee with a board seat.
It’s also easier for directors to assess non-CEO leaders who serve with them on the board, giving them knowledge they can use when it’s time to pick a CEO’s successor.
The default option for boards looking for more insiders is to nominate the chief financial officer. However, selecting an honest employee with leadership potential is more valuable than reaching out to someone with a particular title.
Subscribe to Return on Leadership to receive a bi-weekly round-up of the most provocative and important news and insights from leading business thinkers focused on the issues driving current-day strategy and board governance.