The recent contentious and highly publicized removal of BP’s board chair, Albert Mainfold, offers a governance teaching moment on the importance of role clarity in both the boardroom and the executive suite, especially when CEO and board chair duties are separated.
Disputes concerning the function of senior corporate leadership certainly aren’t unique to international mega-corporations. Fundamental disagreements on the duties of the board, the board chair and the CEO occur all too frequently across enterprise lines. They can have a corrosive impact on the board/management dynamic and can create reputational concerns regarding the effectiveness of corporate leadership. That’s why it’s critical for governance and management to have a shared understanding of “you do this, we do that, and we work together on what’s left over.”
The recent controversy arose in May, when Mr. Manifold was removed with immediate effect following the board’s receipt of whistleblower complaints involving alleged conduct by Mr. Manifold. A board spokesperson described the grounds for removal as involving “important governance standards, oversight and conduct.” According to The Wall Street Journal, the allegations included verbally abusive conduct toward both junior and senior staff members, mishandling company information and withholding information from the board. Mr. Manifold had only served in his position for less than a year. Notably at BP, the positions of board chair and CEO are separated and held by different people.
Various media reports suggested the narrative of a non-executive board chair who brought an aggressive style to his position, seeking to “improve efficiency and effectiveness” that may have run contrary to existing corporate culture. In a public statement responding to the allegations, Mr. Manifold acknowledged that “in [his] determination to drive change on costs, performance, the balance sheet and shareholder communications, [he] may have pushed hard and challenged people directly.” However, his statement vigorously disputed the company’s characterization of his conduct.
The “right and wrong” of these competing claims is unlikely to be resolved with accuracy and finality. But the entire scenario is instructional, nevertheless, given its focus on the role of the independent board chair, whether he or she is appropriately exercising the authority of the office.
Key to establishing clarity on the independent board chair’s role is an acknowledgment of basic leadership roles: The board has approval authority over corporate strategy; establishes the ethical framework for the company; and selects and monitors the CEO. Management operates day-to-day business affairs and develops and implements strategy, both subject to board oversight.
Within that construct, the duties of the independent board chair generally fall into two categories, neither of which are intended to infringe upon, or overlap with executive management.
The first category deals generally with the process of governance; i.e., helping to ensure that the structure of the board meets the needs of the organization, and that the board’s core responsibilities are effectively carried out. This would involve, for example, tasks such as the periodic review of bylaws and board policies, reviewing for appropriateness policies regarding the size and composition of the board, supervising the board’s committee practice, monitoring compliance with the mission statement, leading enforcement of board policies and protocols, supervising governance evaluation processes, directing board education efforts, and helping assure a broad based board and organizational commitment to ethics and compliance.
The second category deals generally with activities associated with the chair’s role as the presiding officer of the board. This would involve, for example, agenda development, scheduling and leading board meetings, coordinating the timely distribution of meeting materials, guiding board discussions, chairing the executive committee, electing committee chairs, and acting as a conduit between the full board and the executive leadership team.
Certainly, there are many shades of gray that exist in the boardroom/management dynamic, some of which can be exaggerated in times of business complexity and regulatory risk. These include, but are not limited to, tasks such as authorizing execution of the corporate social voice and otherwise serving as the primary spokesperson for the organization, supporting organizational relationships with its stakeholders, and facilitating the board’s decision-making process.
Yet experience suggests that it would be atypical for the independent chair to pursue a personal agenda beyond those related to the process of governance and activities associated with the role of presiding board officer. For example, it would be unusual for the chair to pursue a dominant leadership role in establishing the operational goals for the company, or to seek to establish the company’s strategic direction alone. It would be similarly unusual for the chair to regularly engage with management below the senior executive team level, or with employees. Rather, it is the independent chair who is expected to help preserve traditional boundaries between governance duties and business execution in order to prevent micromanagement, while simultaneously protecting against the erosion of board authority by management overreach.
It’s unlikely that the full facts and circumstances underlying the BP controversy will ever become public. But much in terms of “lessons learned” can nevertheless be gleaned from the associated media coverage. The coverage serves as a useful reminder of the need for periodic conversations between governance and management on their respective roles and relationships, particularly regarding the roles of key board officers such as the chair. It also suggests that clarity on that chair/CEO relationship be established at the very beginning of their respective tenures. Maintenance of fundamental board/board chair/management relationships is likely to be an ongoing, shared leadership responsibility.
Mr. Peregrine is a retired attorney and Fellow of both the American Health Law Association and the American College of Governance Counsel.
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