The danger of excercising too much control over a CEO | Managing Leadership

The CEO: too cold

In recent years, activist shareholders have been reviving the long-dormant struggle for power between owners and management. Can they really break the seemingly unshakeable control that CEOs have acquired over their boards? If they do, what might be the consequences?

In some of the most publicized instances, powerful shareholders (individual or institutional) have sought to impose specific executive actions on the senior management of certain companies: divest these non-core holdings, merge or form “strategic alliances” with that company, cease marginal long-term investments and buy back shares instead. CEOs that have been accustomed to being afforded unrestrained freedom of movement, and the rubber-stamp deference of their boards, understandably chafe at such presumptious impositions. But after the seemingly inescapable cycles of competitive building of bloated empires, followed by massive restructurings and downsizings - and even collapse of whole firms - isn’t it high time owners reasserted control, and put such destructively ego-maniacal managers in their place?

Certainly, owners have been remiss in their duties (to themselves) during the past few decades of managerial ill-discipline. And it is indeed high time that they reestablish firm control of the boards ostensibly intended to serve their - and not management’s - interests. But should they also, in effect, replace management, or at least, as it seems, co-opt their highest level executive functions? Where is the line between owners’ retention of, and their delegation to management of, responsibility for the direction of their organizations? We will explore that question, briefly, next.

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