Evaluating the CEO
Reflecting on Stephen P. Kaufman’s Evaluating the CEO gives me the feeling that the initial evaluation conducted by the Board was just perfunctory mainly because it looked as if Board took the initiative to carry out whole process only to calculate the incentive. The author wanted a better evaluation process for the CEO mainly because he believed that the boards have an obligation to ensure the shareholders that companies are led well. He feels that if the CEO stumbles he would pull the whole company down with him. Moreover the board has to have a clear idea of hoe the CEO is doing, so that the board could take apt and timely decisions on future of the company and its leadership.
The Board must meet the executives below CEO level without CEO being present because the directors never have an opportunity to gather information on the behavior and approaches of the CEOs. The directors usually meet the CEOs in structured settings where the CEOs would be at the best of their exposure. Moreover, their visits would help them to give better feed back to the CEOs.
The new process of evaluation was as follows: every year during the months December and January every director met with three of the executives discussing company’s culture, strategy, competitive position and operations. Then the directors would have long discussion sharing their insights (Kaufman 3). If two of them sight the same issue, the issue is flagged to the comp committee. The committee members would then distill their thoughts on the CEO’s performance, organized under five heads such as leadership, strategy, people management, operating metrics, and relationships with external constituencies. As a reference they would have self assessment addressing the same topics send by CEO himself earlier. The outcome of this meeting would be reported to the year end closed section of independent directors. At that stage the group finalize it and fix a compensation. And afterwards they met with the CEO for almost two hours give him the feed back (Kaufman 3).
Finally, my personal feeling is that it helps the CEO to get credible feedback which would in turn beneficial for the company. At the same time somehow this process may have a limitation on the autonomous practice of the CEO because he will have sense of being critically evaluated and reported by the subordinates. Such situation can have a negative impact on the efficiency of the CEO. I would like the system had a change that is the executives for the directors to meet is a particular group who has been entrusted with the responsibility to assist the CEO. In that case the CEO will have a freedom to administer and bring the company along with.
Kaufman, Stephen “Evaluating the CEO” Harvard Business Review. Harvard Business School
Publishing Corporation 2008