The board and the CEO

Introduction

Governance commentators regularly observe that “the most important thing that any board does is to appoint a CEO”. The nature of the relationship between a board and its CEO is a key to the success of the entity.

For Crown entities the formal relationship between a board and the CEO is subject to an advisory role of the State Services Commission. This SSC involvement is often a surprise to newly appointed chairs and board members.

Key elements* in a successful board/CEO relationship:

* adapted from Nine Steps to effective Governance: the Chief Executive, SPARC (now Sport NZ), 2005.

• Having clarity from the board and the CEO in respect to their respective roles with both understanding the need to support the other, the differences between governance and management and their mutual expectations;
• Ensuring there are in place appropriate and robust reporting and information systems so that the CEO knows what the board requires and that the board has confidence in what is being reported;
• That there is a fair and ethical process for chief executive performance evaluation;
• A good and clear working relationship between the chair of the board and the CEO; and
• The CEO helping the board to understand the risks faced by the entity.

The role of SSC in respect to Crown entity CEO appointments and remuneration

The Crown entities in the MCH family of boards are all required to consult the State Services Commission in relation to the terms and conditions of employment of Chief Executives. The chair of any Crown entity who wishes to appoint a new CE should contact the SSC very early in the appointment process. Similar arrangements should be in place for reviews and any proposed changes of employment conditions. The SSC provides practical advice and has a wealth of experience in this area. The SSC has access to relevant data and surveys which can be very helpful to a board.

Appendix

Web links

• Boardworks International, a New Zealand based governance consultancy, has a very interesting perspective on the board/CE interface in its article Eight basic expectations a Chief Executive has for his or her board here.
• Compass point, an American website dedicated to good governance in not-for-profits but with some relevance to our sector, looks at a position description for executive directors: www.compasspoint.org/board-cafe/job-description-executive-director
• Monitoring CE performance is a focus on the Te Puni Kōkiri site at: www.tpk.govt.nz/mi/services/effective/what/monitoring/ceperformance/
• Compass point also outlines the essential principles for evaluating the CEO/executive director at: www.compasspoint.org/board-cafe/annual-evaluation-executive-director
• Sport NZ has developed a nine steps guide to effective governance at: www.sportnz.org.nz/assets/Uploads/attachments/managing-sport/strong-organisations/Nine-Steps-to-Effective-Governance-Building-High-Performing-Organisations.pdf.