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The CEO's Boss: Tough Love in the Boardroom resources

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10 T H E S O C I A L C O N T R AC T board/CEO Social Contract to make it clear that complete honesty is es- sential. Th is can help avoid gray areas by necessitating, for instance, full rather than partial disclosure. When CEO’s withhold information from the board because they know it will be read as bad news, this is not dishon- esty, but it isn’t complete honesty either. When a Social Contract is devel- oped correctly, the board and CEO establish the mutual expectation of full disclosure, which will help them solve their problems together. Th e under- lying ethic is that this partnership is “hard on problems, not on people,” and that the bearer of bad news should not be held immediately responsi- ble. Although the ideal of “complete honesty” is hard to achieve in practice, the Social Contract does hold the board/CEO partnership to a commit- ment to transparency as the code of behavior. Transparency, when used in a Social Contract, implies openness, communication, and accountability. Th e collapse of Lehman Brothers illustrates how a failure in transpar- ent communication between the board and the CEO can lead to disaster. Most objective observers have concluded that Fuld did not fully disclose Lehman’s fi - nancial matters, nor was there an honest assessment of nonfi nancial matters, such as Fuld’s leadership, by the board. Bad news was withheld until too late. Th e price that Lehman Brothers paid for these er- rors of omission or co- mission will be the work of the FBI investigation and lawsuits brought by its shareholders. Commitment to Coaching It has become common practice for boards to support the continuous im- provement of their CEO’s per for mance and to provide a professional coach to assist in the CEO’s professional development. CEO’s should be allowed to choose, with the agreement of the board, the coach that they feel can best provide helpful resources. I’ve served as a coach for a number of CEO’s, and I’ve learned that the strength of the relationship between the coach and the CEO translates into a comparable strength in the partner- ship between the board and CEO. In many instances, my fi rst conversation with a new CEO client be- gins with a query of how things are going with the board. Inevitably, the CEO’s will bring up the concerns of the board and one or more areas of the CEO’s per for mance that are bothering them. I usually structure the rest of my coaching sessions around determining the root cause of these per for- mance gaps and exploring the implications for the CEO’s agenda, prac-

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