Academic journal article IUP Journal of Corporate Governance

CEO's Legacy to the Board: Honesty, Resilience or Trust? the Case of Xerox

Academic journal article IUP Journal of Corporate Governance

CEO's Legacy to the Board: Honesty, Resilience or Trust? the Case of Xerox

Article excerpt

Introduction

The Chief Executive Officers (CEOs) arguably do not enjoy dealing with their corporate boards. However, they can proceed on all major strategic initiatives only with the board's ratification, since the board has the responsibility to protect the interests of the shareholders and other stakeholders. The success of a company is attached to a good strategy, and this good strategy is seen as the sole initiative of the CEO, but the board plays a major role in supporting these strategies and initiatives and deserves proper credit for that success. Although the board and the CEO have broad common interests-to foster the interests of the stakeholders-yet they usually hold divergent opinions to get there. Board and CEO (management) are usually seen to negotiate and work through the decisions, both managing each other. The strategic issues such as entering into a particular market, new product lines, market position, and so on are based on forecasts and environmental scenarios, and having a position-based negotiation on them stalls any effective action for the company. In an effort to be dutiful as directors, the board prefers to negate any different idea of change, to the extent of having a poor relationship with each other.1 However, it is the relationship between the board and the CEO that is critical and is based on the trust and respect for each other (Furr and Furr, 2006). This is necessary for better corporate governance practices in the company. Obviously, this trust and respect do not manifest by itself but are painstakingly nurtured by different actions of the board members and the CEO. This paper focuses on the CEO and suggests how the CEOs generate their share of trust and respect, which at times gets so entrenched that it becomes a legacy for the board to follow, thereby setting standards for corporate governance mechanisms of the company.

Conformist attitude to the 'way the things happen there' in board proceedings may not always be ideal and maybe a resistance to change. Such process is appropriate along the changing external environment. Loyalty to the company is likely to stem from a desirable attitude to change, rather than a 'group think'. Individual board members operate within the purview of a small population of the board, who have their own rituals, traditions and culture. If the causal linkage is marked, more often it points towards the legacy that a strong CEO has contributed to the board. Perhaps, the CEO is a founder member or a person who has salvaged the company from bad times. It is the legacy that the strong CEO leaves, that becomes the framework of values and internal corporate governance mechanisms on which the board acts. With a set value system, it becomes much easier for the board to help the current CEO on factors of decision trade-offs and other strategic issues. This paper is an effort to exemplify how this legacy given by the CEO to the board gets entrenched in the company and builds the foundation of trust and respect which is primarily essential for the board and the management (CEO) to have in order to function effectively.

Research Question

The board provides broad institutional policies and rules that are used as directives or prescriptions for individuals and collective activities in an organization. It is to ensure that the interests of the stakeholders, particularly the shareholders, are protected. Organizational policy and services rules may restrict the human dialog in the board, yet may lay a foundation for two-way communication. Efficient internal communication in the board and the management (CEO) are essential to get the best out of an organization for the shareholders, be it in sharing the corporate vision, the operational efficiency, customer focus, or implementing various strategies. Board and management have found many ways to communicate efficiently and have found ways to control each other. However, trust and respect sometimes stems from the legacy that the CEO leaves to the board. …

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