In today’s corporate America, CEOs are increasingly finding their positions at risk, not just because of financial downturns, but due to a significant shift in boardroom expectations. Performance standards have tightened, and tolerance for missteps is lower than ever before, making the CEO’s role more precarious and demanding.
Recent data underscores a harsh truth: last year saw record-breaking CEO dismissals among Russell 3000 companies directly linked to performance shortcomings, outpacing even planned succession exits. Notably, these terminations weren’t happening at failing companies. In fact, many of these businesses had solid financial results. What’s changed is that boards are no longer willing to overlook even moderate underperformance.
James Drury III, Founder and CEO of JamesDruryPartners, a leading board advisory services firm dedicated to optimizing board selection for America’s top executives, sheds light on this intensified scrutiny. “Today’s corporate boards evaluate CEOs on more than the financial performance of the companies they lead. When done properly, CEO assessments use a combination of quantitative and qualitative data,” he notes. “Boards gather input from multiple sources, including feedback from individual directors, executive team members, and the CEO themselves. Evaluation of CEO performance shouldn’t be a once-a-year event.”
Drury adds, “Boards evaluate CEOs against pre-defined criteria, including financial results, leadership effectiveness, and progress toward corporate objectives. Today’s CEOs must think critically about business decisions and consistently demonstrate strategic alignment, adaptability, emotional intelligence, and forward-thinking leadership. Failures in any of these areas carry greater risk given today’s shifting global environment and macroeconomic uncertainty.”
Drury’s firm has guided hundreds of top-tier executives through board placement processes, giving him unique insights into the evolving dynamic between boards and their CEOs. “The primary job of the board remains clear: ensure the right person is running the company,” he explains. “When the CEO’s vision or approach falls out of sync with expectations, boards must be prepared to act. Any actions taken by the board should be carefully considered and tactfully executed, and always with the best interests of shareholders in mind.”
A major pitfall leading to increased turnover is often subtle yet deadly: misalignment between board members and CEOs on critical expectations and strategy. Frequent and clear communication, Drury argues, is the key to preventing these disconnects. “Communication is key — boards and CEOs must engage in ongoing, transparent dialogue. CEOs shouldn’t be afraid of their boards — a good board wants its CEO to succeed and stands ready to support them in achieving that success,” Drury stresses.
He continues, “CEOs should keep board directors informed about risks, opportunities, and challenges the company may be facing, as well as important decisions that stand to impact the long-term health and direction of the business. Accordingly, today’s boards should be vigilant, attuned to shifting business conditions, and must continuously assess their CEOs to ensure they are properly supported and performing to expectations.”
But how can today’s CEOs navigate this demanding new landscape?
“CEOs shouldn’t regard their board as an antagonistic body or a group of passive overseers. Rather, business leaders and boards should engage with one another as strategic partners working towards a mutual goal,” recommends Drury. “Successful CEOs seek candid feedback and work collaboratively with their boards to clarify objectives, adapt to expectations, and ensure alignment. By building a solid foundation based on trust and open dialogue, a CEO significantly reduces the likelihood of ‘being blindsided’ by the board’s expectations.”
Drury also emphasizes that it’s incumbent on boards to productively engage with their CEOs, know the right questions to ask, and provide support without overstepping the CEO. In today’s business landscape, directors should articulate their expectations explicitly and revisit them regularly.
As the stakes in corporate governance rise, it becomes increasingly clear that CEOs who thrive in this economic environment will be those who master alignment, transparency, and proactive leadership. Drury concludes, “Effective governance demands active engagement.”