The Relationship Between the Lead Director and the CEO

by Jeffrey Stein for The Harvard Law School Forum, May 21st, 2011.

A strong, productive relationship between the lead director and a company’s chief executive officer (“CEO”) will support improved corporate performance, as well as a more effective board of directors. Such a relationship between the lead director and the CEO can help a company execute its strategy more effectively, successfully navigate a crisis, complete a major corporate transaction and resolve the multitude of other issues that a company and its board will encounter. However, notwithstanding the increased prevalence of the lead director position and the recent expansion of lead directors’ roles, there is little formal guidance as to what practices and procedures are beneficial, or detrimental, to the relationship between the lead director and CEO.

Against this background, the Lead Director Network (the “LDN”), a group of lead directors, presiding directors and non-executive chairmen from many of America’s leading companies, met on March 1, 2011 to discuss the relationship between the lead director and the CEO. Following this meeting, King & Spalding and Tapestry Networks have published a ViewPoints report here to present highlights of the discussion that occurred at the meeting and to stimulate further consideration of these subjects.

The following provides highlights from the meeting, as described in the ViewPointsreport.

1. Factors Affecting the CEO-Lead Director Relationship

At the meeting, LDN members discussed the key factors that affect the CEO-lead director relationship, including the following:

  • CEO and lead director experience: CEOs who are new to a company or who do not have a background in the industry are more likely to seek advice from the lead director, both in managing the company and in dealing with the board. Lead directors are especially well-positioned to advise the CEO when they have themselves previously served as CEOs.
  • Unique challenges and opportunities facing the company: Although significant challenges facing a company may strain the relationship between a CEO and the lead director, these difficult circumstances require the greatest collaboration between the two individuals. In these situations, the lead director can help not only by providing objective advice, but also by dealing with key constituencies. (continue reading… )

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