This article explores the unique advantages military experience offers to corporate boards, particularly in enforcing CEO accountability. Analyzing data from 865 U.S.-listed manufacturing firms, the authors found that boards with military directors are more decisive in addressing underperforming CEOs. The article highlights three key accountability principles military directors bring to the table: clear objectives and metrics, direct communication and feedback, and decisive action and consequences. By adopting these principles, any board can enhance its oversight capabilities and foster a culture of accountability within the organization.
CEOs are seldom dismissed when the company they lead underperforms, in part because they wield considerable power over the board. So how can boards more effectively enforce CEO accountability in the face of poor performance? The authors recently analyzed boards of 865 U.S.-listed manufacturing firms between 2010 and 2020 and identified an often-overlooked source of accountability principles: the military.
Boards with directors who have military experience, they found, are more decisive in addressing CEO underperformance, often opting to dismiss the CEO when necessary. In this article, they discuss three key accountability principles that these directors have brought with them from the military — and explain how any board can make use of these principles in overseeing their company’s CEO. When a company starts to struggle, all eyes turn to the CEO. Shareholders demand results, employees seek direction, and internal contenders begin analyzing vulnerabilities and positioning themselves for the top job. There’s a strong expectation for the CEO to resolve the problem or face removal. But not always in the boardroom, where directors are reluctant to make bold, decisive moves and instead engage in drawn-out debates that sidestep critical issues. Even in the face of recurring underperformance, many boards choose to retain their CEOs for extended periods. This reluctance to hold CEOs accountable stems from a variety of factors, including the CEO’s influence over the board through their control of information, their ability to cultivate relationships with directors, and the potential for legal challenges. However, the authors argue that boards with military experience can overcome these obstacles and effectively address CEO underperformance. Military leaders are trained to make tough decisions quickly and decisively, and they are accustomed to operating in high-pressure environments. This experience translates well to the corporate world, where boards need to be able to make difficult choices in a timely manner. \Furthermore, military leaders are often held to a higher standard of accountability than their civilian counterparts. They are expected to take responsibility for their actions and decisions, and they are subject to strict performance evaluations. These principles of accountability can be invaluable to boards in overseeing their CEOs. The authors identify three key principles that military directors bring to the table: 1) Clear Objectives and Metrics: Military leaders set clear, measurable objectives and track progress closely. This ensures that everyone is working towards the same goals and that performance is evaluated objectively. 2) Direct Communication and Feedback: Military leaders value direct, honest communication and provide regular feedback to their subordinates. This fosters a culture of transparency and accountability, where issues can be addressed quickly and effectively. 3) Decisive Action and Consequences: Military leaders are not afraid to take decisive action when necessary, and they hold individuals accountable for their performance. This creates a culture of urgency and results-orientation, where underperformance is not tolerated. \By adopting these principles, any board can improve its effectiveness in overseeing its CEO and holding them accountable for performance. This can lead to a more engaged workforce, increased shareholder value, and a stronger overall organization.
CEO Accountability Military Leadership Board Of Directors Corporate Governance Performance Management
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