THE Rx FOR CEO DISEASE: AN ALERT BOARD
There are plenty of chief executive officers who perform admirably. Unfortunately, another big group of CEOs doesn't measure up to the demands of the job--often with disastrous consequences. In these situations, a strong, independent board of directors that includes a number of outside directors must play a central role. In too many cases, directors see clear signs that their chairman is afflicted with CEO Disease (page 52), but postpone corrective action until it's too late. The executive responsible for a large company needs to be carefully monitored by the board and frequently reminded of the right priorities. One reason: No one else--certainly not a subordinate--is likely to challenge the CEO.
How can a board do this? First, by insisting on a thorough and objective review of the CEO's performance at regular intervals. Like those for other managers, these appraisals should set specific objectives and agreed-upon measuresof progress. Executive expense accounts, compensation, perks, and the use of corporate assets should be subjectto strict scrutiny by a committee of outside directors. Hard questions need to be raised, even if there is only a hintof excess.
For an inside glimpse of the CEO, directors need to spend time in private with other key members of the management team to ensure that the board is exposed to different viewpoints. Perhaps most important, directors need to rein in the outside activities of CEOs. It is simply unrealistic to think that a CEO can handle the responsibilities of the office while sitting on the boards of half a dozen other companies and participating actively in numerous charitable and civic organizations. There is a place for these activities, of course, but being an effective CEO is already a full-time job.