By: Tom White
Intel Corporation recently undertook a board restructuring effort amid its struggling stock performance. Intel added two semiconductor experts, Eric Meurice and Steve Sanghi, to its board as part of a broader effort to align the board’s expertise with Intel’s strategic focus on revitalizing its foundry business and leveraging U.S. Chips Act grants.
Intel’s case underscores an important consideration: no company, regardless of size or reputation, is entirely immune to the need for strategic alignment through board refreshment. Board refreshment is a significant component of modern governance, offering opportunities to enhance alignment and agility. However, it is not without challenges. At its optimal, the refreshment process helps boards remain dynamic, relevant, and strategically aligned with the organizations they oversee. Yet, like any governance initiative, board refreshment entails potential risks. An overly formal process that strictly adheres to evaluations, term limits, and succession planning may struggle to adapt to rapid shifts in strategy or emerging challenges. Conversely, an overly informal approach, driven by ad hoc decisions or personal networks, may leave critical expertise gaps unaddressed, potentially hindering the board’s ability to support evolving organizational needs.
This delicate balance makes board refreshment both a strategic opportunity and a nuanced challenge. CEOs should approach the refreshment process with this balance in mind. Their involvement often depends on the board’s structure. When the CEO also serves as Board Chairman, they are typically engaged in identifying potential weaknesses in board composition and addressing gaps through collaboration with the Lead Director and Governance Committee. In contrast, when the CEO is not the Chairman, their role shifts to a consultative one, providing insights into business needs while leaving final decisions to the Governance Committee and Chairman.
Whether preparing for global expansion, responding to market disruptions, or entering a new growth phase, keeping the board aligned with strategic priorities is critical to fostering long-term resilience and adaptability. Regardless of the structure, the CEO often plays an influential role in shaping a board capable of addressing both present and future challenges.
The CEO as Board Chairman: Leading the Process
James Drury, III, Founder, Chairman, and Chief Executive Officer of JamesDruryPartners, explains, “In cases where the CEO concurrently serves as Board Chairman, their involvement usually includes collaborating closely with the Lead Director and Governance Committee to identify potential weaknesses in board composition and address gaps in expertise. This process may involve director performance reviews, succession planning, or setting term limits to encourage the board’s adaptability to changes in the business landscape.”
These efforts may include:
- Director Performance Reviews: Evaluating individual contributions to ensure directors provide value to the board.
- Succession Planning: Anticipating retirements or transitions and preparing the board for seamless leadership changes.
- Term Limits: Encouraging turnover when necessary to introduce fresh perspectives and new expertise.
The CEO-Chairman plays a critical role in aligning the board with the company’s strategic goals. For instance, pursuing global expansion might necessitate directors with international expertise, while navigating a digital transformation could benefit from leaders with strong technology backgrounds.
Alignment does not end with getting the composition of the board right. According to a Deloitte report, board chairs play a pivotal role in fostering collaboration among directors and driving a forward-thinking approach to governance. By leading these efforts, the CEO-Chairman ensures the board remains a dynamic and valuable asset to the organization.
The CEO as Consultant: Providing Strategic Insights
Drury notes that when the CEO is not the Chairman, the CEO’s role tends to be more consultative, focused on offering insights rather than directly making decisions. The Chairman and Governance Committee oversee decision-making, but the CEO provides valuable input to align board composition with the company’s strategic needs.
Key responsibilities of the CEO in this role may include:
- Offering Strategic Context: Helping the board understand the company’s long-term vision and the expertise required to achieve it.
- Identifying Emerging Needs: Highlighting gaps in board composition that may hinder the company’s ability to execute its strategy.
- Advising on Key Appointments: Recommending candidates who bring the skills and perspectives needed to address evolving challenges.
While the CEO’s role in this structure might appear less direct, their insights remain crucial to equipping the board to guide the company through its next phase of growth.
Balancing Risk and Opportunity in Board Refreshment
Striking the right balance in board refreshment requires both formal structure and flexibility. CEOs, whether acting as Chairman or Consultant, must ensure that the process adapts to changing circumstances without becoming too rigid or overly informal.
This delicate balance often comes into focus during significant events, such as entering new markets, addressing business disruptions, or navigating organizational changes. In these scenarios, board refreshment becomes a strategic priority, not merely a governance formality.
Drury, based on his experience founding a leading board advisory services firm specializing in proactive board selection for Fortune 1000 executives, shares, “Regardless of the situation, board refreshment should focus on addressing evolving business needs. Many corporations regard director refreshment as essential to ensuring board alignment with strategic business objectives. This process frequently occurs before or after a major business transformation, a shift in corporate strategy, or expansion into new international markets. Directors whose expertise is no longer aligned with company needs may retire to make room for those with more relevant executive experience and professional skills.”
Board refreshment is a multifaceted process that underpins effective corporate governance. By aligning board composition with the company’s goals and fostering adaptability, CEOs can leverage board refreshment as a strategic advantage.
Whether serving as Board Chairman or in a consultative capacity, CEOs who strike a balance between governance structure and strategic flexibility can help shape boards that are resilient and well-prepared to drive future growth.
Published by Anne C.
