CEO and director relationships

The directors and CEO have very different roles and responsibilities, and they should stay separate. In relation to the CEO, the board should remember it is the employer and carries certain legal obligations. The board’s role is to:

  • hire the CEO and induct them into the culture of the corporation and the communities it represents
  • share the corporation's vision and support the CEO to turn it into action
  • regularly assess (and note) the CEO’s performance
  • provide a safe and respectful workplace for the CEO. 

The CEO’s role is to:

  • act on the corporation's vision and report on the corporation’s progress
  • be the champion for the vision among staff, funding bodies and other stakeholders
  • convert the vision into a step-by-step plan and secure staff and resources to carry it out
  • track progress, income and expenditure and give regular reports to all the directors.

Corporations have a better chance of success when the board and CEO:

  • understand their roles and avoid conflicts
  • work well together
  • share an understanding of the corporation's mission and values
  • trust one another. 

If a director is also a CEO

A director who is also the CEO cannot be involved in board discussions or decisions about the CEO role, including their:

  • appointment or removal
  • performance related discussions
  • contract deliberations
  • salary and other benefits, including the payment of bonuses and any annual increases.

The other directors will also need to decide how they will manage the CEO’s performance, including how performance discussions will be held and who will hold them.
A director who is also the CEO should also not be involved in discussions or decisions that they will be responsible for implementing. This is also a conflict of interest.

How someone came to be both the CEO and a director will also assist the directors in managing conflicts of interests. If for example a sitting director is then appointed as the CEO they should not be involved in any board discussions about planning for the CEO including job description, remuneration or the recruitment process.

When managing a CEO

Directors need to understand what is considered to be reasonable management action and what is considered to be bullying and harassment. 

Directors should not expect to be involved in, or making decisions about, the day-to-day operations of the corporation. They should also not expect to direct staff of the corporation to do tasks. This is the responsibility of the CEO – not the board.

Corporations should have agreed processes for their board to raise any concerns with the CEO. Concerns about a CEO’s performance should be raised consistent with the corporation’s performance management framework or CEO’s employment contract. Directors need to raise any concerns through the appropriate process or mechanism agreed by the board and not individually and directly with the CEO. 

The chairperson should not be meeting with the CEO without the rest of the board. The chairperson and CEO cannot make decisions without oversight from the rest of the board.

Restructures of a corporation often cause disputes between the board and CEO. For a significant restructure of a corporation, a CEO should consider seeking board approval first. 

Attending directors' meetings

CEOs should not expect to attend directors’ meetings unless they are also a director. The board may invite a CEO to attend some or all of a directors’ meeting. CEOs may be invited to provide operational updates, present reports, answer questions, or give information on a particular matter being considered by the directors. Once that information has been provided, the board may ask the CEO to leave so directors can discuss and make decisions independently.

Some boards choose to have the CEO attend all directors' meetings as a standing arrangement. This is a matter for the board to determine and should reflect the corporation's governance needs and circumstances. Even where it is the usual practice for the CEO to attend the board meeting, boards may from time to time need to discuss certain matters on the agenda alone. Sometimes this is called ‘in camera’. CEO attendance at directors’ meetings is not an automatic entitlement and is always at the board’s discretion.

Treatment of CEOs

CEOs are protected by workplace legislation. CEOs do not have to tolerate aggressive behaviour, including threats, swearing or yelling. CEOs also do not have to tolerate being pressured to behave inappropriately. 

The board has a responsibility to keep the personal information of the CEO and any staff confidential. Personal information includes the CEO’s home address, race, religion and age. This information cannot be shared with members or the broader community. Personal information of the CEO also includes salary and any other benefits as well as performance conversations. This information must also not be shared outside of the board room. Directors can face prosecution for breaching a CEO’s privacy.

Directors who do not treat CEOs fairly can make it difficult for the corporation to attract and retain CEOs and other staff. Poor behaviour by directors can also affect the reputation of the Indigenous corporate sector as a whole. This can make it hard for other Aboriginal and Torres Strait Islander corporations to attract and retain CEOs and other staff.

Disputes between directors and CEOs, as well as a high turnover of CEOs, can affect funding bodies’ confidence in a corporation and impact on funding agreements.

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