There can be an inherent conflict between a CEO and their board; the board may be focused on short-term gains for shareholders while the CEO is trying to steer the course for long-term success. With increasingly short CEO tenures (HP CEO Leo Apotheker was in the top seat for less than one year), CEOs are under pressure to give the board what they want, even if perhaps that means sacrificing long-term health for recognizable gains now.
The Harvard Business Review pulled together a list of questions that CEOs and boards can ask each other to try to bring their mutual goals more in line with each other.
The questions involve defining the role of compensation, social responsibility and defining value creations for the company at large:
- Where should we place our primary focus – shareholders, stakeholders or society at large?
- What is long-term shareholder value really about and how is it created?
- Can we influence who our shareholders are?
- What is our responsibility to the survival of the firm as an institution?
- What changes should we make in our pay practices to encourage long-term value creation?
- What should we be doing to build the intrinsic motivation of our people, recognizing the possibility that our pay practices might be a detriment to motivation?
- Do we need to rethink the role of corporate social responsibility in our firm?
- What should we be doing now to ensure an internal successor is ready when the CEO retires?
When the answers to these questions are decided, they should be shared with shareholders and referred to when there is a potential conflict between the CEO and the board on the company’s priorities.