Societal and governance issues pelting boards of directors—from the rise of the #MeToo movement, activist investors and impact funds are starting to redefine the traditional relationship between directors and the CEO. Boards once pals with leadership while keeping to the tradition of not meddling are now assessing potential structural changes needed to create a more productive—and safer—relationship.
With directors’ personal reputations at stake, as well as personal liability, they are strengthening monitoring programs, asking tougher questions and engaging in more vigorous debate on topics boards used to avoid, such as sexual harassment by the CEO. The upshot: The question now is not what did the board know but why didn’t the board know?
“The danger of the CEO getting directors in trouble as their personal activities have come into focus has grown exponentially,” observes Charles Elson, director of the Center for Corporate Governance at the University of Delaware.
