The New CEO Philosophy Regarding Boards

For many years, CEOs regarded boards as necessary evils. Their goal was to stack the board with people who wouldn't challenge management's authority. After Enron and Sarbanes-Oxley, boards veered in the other direction--they included more independenty directors who were more inclined to challenge and question a CEO and his or her top management team. That created a distance and a formality between CEOs and their boards, sometimes hostility.

But now my conversations with executive search experts and directors suggests that there's a new tone creeping into how CEOs go about working with their nominating committees to create boards--they actually want people on their boards with functional expertise to match the strategic direction of the company. Mark Hurd of Hewlett-Packard is one CEO who has done that by including a banker and a software expert on his board because HP wants to make deeper inroads in banking and in consulting, not just selling hardware.

The new thought process works like this: what are the five-year goals for where the company is going? Do we need help with innovation, global markets, CEO succession or branding? When the need is identified, the search for a director with those specific skills is on.

A corollary of the new thinking is that directors ought to be encouraged to engage with management rather than be kept at arm's length. The chairman of the audit committee should be available for consultations with the chief financial officer. The head of the nominating/governance committee should have a strong relationship with the senior vice president of human resources. And so on.

It all makes perfect sense, but it's been a long time coming. Maybe now, CEOs and boards can get back to the fundamentals of running great businesses.