One of the key lessons to emerge from the CRC scandal is the importance of maintaining a meaningful divide between Governance and Management. At a time when the sector’s reputation has been severely damaged, charities must demonstrate that their governance practice is open and transparent. Here we look at why having a CEO on your Board is damaging for your organisation.
Blurring the governance/management divide
The CEO and the Board serve two very distinct purposes. The Board, as the governing body of the organisation is responsible for setting the strategic direction of the organisation. In this capacity, the Board delegates and oversees the implementation of the strategic plan – which in turn is executed by the CEO.
Overlap between management and governance will inevitably occur from time to time, but the point here is that the Board and CEO have fundamentally different purposes. The involvement of the CEO in the Board’s affairs therefore automatically undermines this essential balance of power.
Conflict of Interest
As the governing body of the organisation, the Board will often be voting on decisions which directly affect the CEO – for example their salary. Involving the CEO in this decision-making process creates a major conflict of interest, and significantly reduces the Board’s independence. Instead the role of the CEO is to report, and makes recommendations to the Board.
The independence of the Board is a corner-stone of good governance and should be upheld as a top Governance priority.