The late legendary headhunter Gerry Roche, a personal friend of mine, famously proclaimed that the primary duty of the board is to “hire the CEO, and then get out of the way until they need to hire a new CEO.” However, boards cannot simply go on cruise control until there is poor performance or conduct in the corner office. Boards must protect the character, financial health, legal compliance, social purpose and long-term value of the enterprise, plus ensure responsiveness to its owners and other key stakeholders. Yet, at the same time, micromanagement in crisis can be a risk.
The board of Zenith Electronic Corporation in the 1990s is one example. Under the long-serving visionary CEO Jerry Pearlman, Zenith pioneered HDTV, building on its innovative legacy of having created remote control electronic devices, stereo radio, stereo TV, shortwave radio and subscription TV, not to mention establishing the foundation of cable and streaming tech platforms and digital transmission technology. Pearlman’s gritty determination and financial acumen were credited for Zenith’s survival as the last U.S.-owned TV maker.
INTO THE WEEDS
Yet, when facing down what Pearlman called the “profitless prosperity” of the TV industry in the ’80s and early ’90s, the board panicked, demanding full board meetings of up to four hours every week to two weeks to address the challenge of responding to lower-cost competitors and activist investor threats. Pearlman was stripped of normal discretion for three years, from 1992 to 1995, as the board questioned each and every managerial decision.
Outside director Peter Willmott bragged, “We’ve been working in the trenches.” Meanwhile, Pearlman confided to me that he was so busy preparing for and following up on board meetings that he had little time left to actually manage the business. Ultimately, the board’s overreach backfired, and the struggling company was sold to LG Electronics.
Twitter, now called X, is experiencing the opposite issue—no board voice at a time when the company is struggling to recover from losing over half of its advertisers since Elon Musk bought the firm for $44 billion. Musk lost no time laying off 7,500 employees after suffering a huge drop in users while loaded down with $13 billion in debt.
After Musk decimated the company’s protective moderation of content, hate speech quickly soared by more than 60 percent, according to the Anti-Defamation League. Next, while embarking on an ambitious strategic shift to mirror the Chinese WeChat by offering embedded links for audio, video, messaging, appointments, payments/banking and a vast marketplace for goods, Musk announced a bewildering decision to replace Twitter’s well established logo with the letter “X,” which denotes exits in all software programs.
The decision has been greeted with such universal mockery that the children’s show Sesame Street responded with a satirical announcement that the letter X would be holding a press conference. Even newly hired CEO Linda Yaccarino struggled to explain Musk’s move, which clued observers in that she was clearly along the sidelines during decision-making. As one prominent social media analyst put it, “The launch was a clear indication that even though she may have the title of CEO, Musk is very much still in charge.” A strong Twitter/X board might have provided balance and helped fortify Yaccarino’s voice in challenging impulsive, brand-destroying moves.
Clearly, board micromanagement and board abandonment are both flawed approaches, whereas the middle ground of board partnership with a CEO mastering a turnaround is the right approach. While CEOs must have the discretion to make bold moves in times of crisis, boards can assist, as we have seen done at Dell, Starbucks and Apple, each of which rebounded after a legendary CEO was brought back by a board that admitted needing help. Each of these companies rebounded within two years of bringing back Michael Dell, Howard Schultz and Steve Jobs, respectively.
As Groucho Marx would advise a board in crisis, “Be open-minded—but not so open minded that your brains fall out.”