Too many CEOs a sure sign that something’s rotten

It was Marcellus in Shakespeare’s ‘Hamlet’ who famously said ‘something is rotten in the state of Denmark’ and there’s a reason why he said ‘state of Denmark’ rather than just Denmark; he’s emphasising that all is not well in the very top echelons of the political hierarchy.

Enough of my recollections of my school set works but this is not idle rambling… there’s a point to it.

And it’s this…in the world of corporate governance, it’s true to say that when there has been CEO churn, there’s something foul and unpleasant at the top of the organisation, in its boardroom.

High CEO turnover is perhaps the biggest red flag there is and it reminds me – here I go on the recollection trail again, but this time on a governance tack – of a number of recent and not-so-recent examples.

Just recently in South Australia, we’ve had word that the chair of the Islamic College of South Australia allegedly got so deeply involved in operational matters, matters clearly beyond his domain, and instructed the principals to hire and fire certain staff. Tired of his incessant interference, they upped and left, at such a rate that the school ended up having four principals in just three years!

Going back a little, I worked with a commercial cooperative in the hospitality sector where members were separate operators of facilities. There were about 100 of them in total, scattered across the country, and the chosen model was to have members from the various geographical areas voted onto the national board, ostensibly to ensure that every region was ‘represented’.

So far, so good, but the board soon got involved in matters such as negotiating international deals. It was an area the members, more at home in the wheelings and dealings of Naracoorte than New York, had little or no experience in.

They were clearly out of their depth but ploughed along, frustrating the executive team in the process.

Finally, they accepted that what they were increasingly dealing with was beyond the expertise of those around the table. They relented, brought in an independent chair and that’s more or less when I came into the picture.

During a tea break in one of the sessions I was running, a board member sidled up to me and looking a little downcast said, in all sincerity: “You know, we’ve had such bad luck as an organisation…we’ve had five CEOs come and go in just seven years.”

Of course, the problem, the source of the ‘bad luck’, was a whole lot closer.

This board, individually and collectively, needed to place a big mirror in front of themselves and stare at it long and hard. There was the problem…

This board had not allowed the CEOs to get on with their jobs and had paid the price, with regular resignations.

So, my advice to would-be board members is this: be very cautious of joining a board that has been through many CEOs in a short space of time.

And remember the immortal words of Marcellus.

Until next time,

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