Wednesday, December 9, 2009

Big Idea: What if Associations Allowed CEOs to be Board Chairs?

I thought I'd get in on the action with December being declared Big Ideas Month over at the Acronym Blog.

This post from the Harvard Business Blog has been kicking around in my brain since I first read it in early November. In it, Bob Pozen asks if for-profit CEOs should be allowed to be Chair of their own Boards. In other words, are companies better run when a single person holds both the position of CEO and Board Chair, or when two different people--with different skill sets--each hold one of those positions and work together as a leadership team?

I'll admit, my first reaction was to think two. You've got to have two different people in those positions because they encompass two very different sets of responsibilities, and they are meant to complement and counterbalance each other.

But Pozen goes on to state that empirical studies show no statistically significant improvement in either a company's net income or its stock price when those positions are filled by two individuals versus one. Indeed, Pozen says, the only arrangement that seems to show consistently negative results is when a former CEO becomes the Board Chair of the same company. In the for-profit world then, having a separate CEO and Board Chair is not necessarily an advantage. Pozen says that only 37% of U.S. companies have that arrangement.

So that got me thinking about the association world. In my own experience, every association I've ever worked for has had separate Board Chairs and CEOs. And that's also true of every other association professional that I know. Is there anyone out there who actually serves both roles in a nonprofit association? Would such an arrangement even be legal? Given the amount of literature, educational programs, and hallway conversations that go on about how to keep the two jobs separate but closely aligned, I have to think the practice of having a single person fill both roles in an association is either rare or illegal.

But what if it wasn't? A Google search turns up a fair amount of debate on the subject in the for-profit world. More seem to think it's better to split, but those who think it's better to merge cite several advantages:

1. Once a Board commits to merging the two roles, they spend less time on a watchdog evaluation of the CEO and more time on making smart decisions for the organization.

2. A combined CEO/Board Chair is better able to withstand pressure from the Board and stick with a long-term strategy, especially when short-term changes don't immediately pay off.

3. A CEO who is not the Board Chair is the Board's hired hand. A CEO who is also Board Chair has far more influence over the other Board directors.

I personally have never wished to be both the CEO and the Board Chair of the associations I've worked for. And I'm not bucking for the job now. But I can imagine situations when such a structure would be advantageous.

So much time and energy is spent on getting the right leadership team in place--two individuals that understand their roles, clearly communicate with one another, and work in partnership to fulfill the association's mission. When it works, it works really well. But such successful synergies take time to develop, and too often they end before they even get started, because Board Chairs ultimately rotate out of the positions at the end of their terms. In the associations I've worked with that's usually after one year. I still remember what it felt like to "lose" the best Board Chair I ever worked with.

As association CEOs we know this turnover is inevitable. So, we develop all kinds of policies, procedures and resources to bring the new Board Chairs up to speed as quickly as possible. We know they are key to our organization's success, so we do things like groom them while they're in subordinate positions on the Board. We create committees made up of future Board Chairs to help determine long-term strategy, and we use the decisions of those committees to help shield our associations from the distractions that come with having to "turn the battleship" with each new Board Chair, or with needing to protect "legacy programs" of past Board Chairs. We spend copious amounts of our time on these activities, working hard simply to get our associations ready for effective governance.

Imagine what our associations could accomplish if more of that time was spent on actual governance itself.


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