- Posted by Jannice Moore
- On April 15, 2020
- CEO Evaluation, Monitoring
This pandemic is challenging for boards and CEOs. One issue expressed to me by several boards is how to support the CEO if the CEO is unable to meet the board’s expectations stated in existing Ends and Executive Limitations policies due to the changed circumstances resulting from the COVID-19 pandemic
CEOs are often reluctant to report non-compliance with any policy, and I’ve seen a variety of approaches employed by CEOs in the effort to avoid such reporting, or by boards in amending policies so the CEO won’t have to report non-compliance. Much better is simply to report non-compliance when it unavoidably occurs – which will happen from time to time – along with the CEO’s indication of when the board can expect to see compliance. The board then has the responsibility of assessing the seriousness of such non-compliance and taking it into account when evaluating CEO performance.
Have the values expressed in the Executive Limitations and Ends policies changed, simply because of the pandemic? No. It seems rather to be an issue of priorities. For example, if the situation warrants all available staff energies focused on ensuring safety of employees and clients, and essential services available to clients, while achievement of other Ends may have to wait, the board would not penalize the CEO for not having achieved some of the other Ends. Similarly, if actions to comply with some Executive Limitations policies – let me pick as an example this one: “CEO shall not cause or allow buildings to be subjected to . . . insufficient maintenance” – have to be temporarily put on hold, the board will not penalize the CEO. That doesn’t mean the board would necessarily want all other Executive Limitations policies being on hold, such as not allowing the organization to have adequate insurance.
The CEO always has the responsibility of using his or her best judgment in a situation. There are times when being non-compliant with a particular policy in a given situation may be the wisest course of action. The CEO should then report the non-compliance, along with rationale, and the board should take that into account. Of course, the board should be aware of all such non-compliance, and your Executive Limitation on Communication to the Board, should already contain an item along these lines: [CEO shall not] Let the board be unaware of any actual or anticipated non-compliance with any Ends or Executive Limitations policy, regardless of the board’s monitoring schedule. What may – probably will – change, is the CEO’s interpretation of relevant policies in the short-term; e.g., “until [appropriate date], due to the pandemic, ……..”
The issue to address, then, is about the board’s own actions in assessing the CEO’s performance.
If the board wishes to provide the CEO with some assurance that it will take unusual circumstances into account (even though it should always do that anyway), an appropriate way to do so, remaining true to Policy Governance principles, would be an amendment to the Board – Management Delegation policy on Monitoring CEO Performance. (This policy is the board telling itself how it will handle its processes.) It might say something like this: “Until [date], due to the COVID-19 pandemic, if the CEO reports non-compliance with existing Ends and Executive Limitations policies, supported by sufficient rationale as to why such non-compliance was the wisest course of action in order to support employees and clients during the pandemic, the board will not consider such non-compliance negatively in its assessment of the CEO.”