How new CEOs can start off on the right track with their board

As they get promoted to CEO, many executives view this long-awaited move as the highlight of their career. After all, they are in the process of taking the top position in the organization – setting the priorities, setting the strategy, allocating resources and developing the best talent for the team.

For many, an unexpected challenge looms that new or aspiring CEOs may not be fully prepared for: their relationship with the board. Here’s how I explain the dynamic, based on my own experiences as a CEO and as a board member and chairman.

First, it is important for new CEOs to reflect on the fact that they have only had one boss in each position throughout their careers. In addition, each of these bosses previously held senior management positions in the company and was therefore very familiar with the responsibilities of this job. Now, as new or aspiring CEOs, they will have up to 10 or even 15 bosses – also known as a board of directors.

In addition, CEOs also report to board members who have never worked for the company, including many who have no experience in the industry. For example, when I became CEO of Baxter International, a $12 billion healthcare company, one of the board members had a background in restaurant management. He knew a lot about gastronomy, but nothing about health care.

Such challenges can cause tensions that can even lead to an adversarial relationship. As stated in a McKinsey report in 2023“If the relationship between the CEO and the board is poorly managed, it can lead to a loss of trust and crippling ineffectiveness.” The prospect is even more frightening when you consider research showing that up to 25% of corporate boards are dysfunctional.

Consider what happened at OpenAI when Sam Altman, founder and CEO, was fired by the board who accused him of ineffective communication and misinformation. About a week later, amid protests within the company over his removal, Altman was reinstated, and the board was later reshuffled. The question remains: How much of this unproductive drama could have been avoided if both the CEO and the board had focused more on their working relationship?

A positive relationship begins with setting expectations

With my experience as a CEO and serving on more than 20 boards, including Leidos and OptionCare Health, I am often asked by new and aspiring CEOs for advice on how to build a positive and productive relationship with their board. My advice can be summarized in a four-step model that is commonly used in values-based leadership, particularly for building rapport and reducing frustration and conflict with the board.

The first step in the model is to set clear expectations for both parties. From the board’s perspective, expectations are about how often they want to meet with the CEO, how detailed the discussion should be, and that the board wants to hear not only what’s going well, but also about the key issues and challenges which the company stands for.

It is reasonable for the CEO to expect every board member to show up to every meeting on time and be prepared to challenge management in a respectful manner. Perhaps the biggest expectation is that board members know the difference between management and governance. I often think about the advice I received from William Graham, the longtime chairman and CEO of Baxter International: “Management manages and the board governs.”

When these expectations are well understood by both parties, everything works smoothly. It is much easier to practice values-based leadership, e.g. B. to emphasize the values ​​of the company and its managers and to stimulate healthy debate for a balanced perspective.

However, I have seen many cases where either the board becomes overly involved in the management or a weak management team relies on the board for leadership. The result is confusion about whether the CEO or the board is actually running the company. Often there is chaos and unnecessary drama.

One of the most tumultuous examples was Disney, where another board change and another CEO search are in the works. Additionally, the company became embroiled in a costly proxy battle after activist investor Nelson Peltz and former Marvel CEO Ike Perlmutter unsuccessfully attempted to win board seats. Now the Disney board will soon take on its fourth chairmanship in three years, and Morgan Stanley CEO James Gorman will take over the post. Gorman’s agenda includes finding a successor to CEO Bob Iger, who is expected to step down for a second time in 2026. Iger retired in 2020 but returned two years ago after the company fired then-CEO Bob Chapek. Clearly, building a good working relationship between board members and with the new CEO must now be a priority.

Communication, expectations and consequences

Once expectations are set, the second step is to communicate clearly and often. I have seen many situations where management did not keep the board informed about an important issue and the board was surprised. (Certainly not healthy for a new CEO). Neither boards nor management want to feel taken by surprise.

When expectations are formulated and clearly communicated, the third step follows: taking mutual responsibility. If expectations are clearly defined and communicated, the board should have no problem holding the CEO and management accountable. If management is not held accountable, no one should wonder why the company lacks discipline and credibility, resulting in a lower stock price.

Finally, the fourth step is to understand the consequences of meeting expectations or not. When expectations are not met, CEOs should not be surprised to find themselves no longer leading the company. Likewise, board members who do not promote a healthy, challenging environment or who consistently exceed their leadership responsibilities should be removed from the board. And when expectations are met on all sides, the reward is a better performing company and a rising stock price.

As new CEOs take control of the company, they must not lose sight of the importance of building a positive working relationship with the board. A good relationship will help ensure a successful and smooth transition for the new CEO and better management throughout the company.