How to please everyone

The CEO of Cadmus Technology, Ian Bailey. Picture / Fotopress

The requirement to grow a business, find and retain talent, and invest wisely makes the role of CEO for a private company challenging enough. Throw in a multi-member governance board, thousands of shareholders and sharemarket regulations, and the role of CEO for a publicly listed company seems positively daunting.

Why do executive managers choose to work in the public sector - and how do they juggle the expectations of boards, shareholders and staff and still drive a business forward?

Ian Bailey, CEO of publicly listed electronic payments company Cadmus Technology, sometimes feels pulled in three directions. "I frequently feel like that. You get competing views and if you have 130 people [the number of Cadmus staff] heading in one direction and the board selects a new direction, it becomes a question of how do you turn the ship?"

In an 80/20 split, Bailey spends most of his time on human resource, business strategy and infrastructure decisions, and the rest preparing for and attending monthly board meetings and the annual general meeting for shareholders. The most challenging aspects of his job are the issues that arise around the need to drive growth.

"It is a serious role because you employ and [remunerate] so you are dealing with people's lives."

Bailey says decision pressures felt by CEOs can be eased by good counsel from a well-selected board.

"The expertise of individual members on the board is a valuable business resource. We acquired a finance company and benefited from having a board member with a lot of expertise in that area."

Bailey says though CEOs usually have to present a business strategy, a board may not agree with all strategies, forcing both parties to work towards a mutually satisfying decision.

"I have had disagreements with the board and that's not unhealthy for business. If I had driven [my decisions] through, that would have been unhealthy. In the end we reached some middle ground."

He says problems between boards and CEOs are often caused by over-inflated egos and, though a CEO can benefit from having a thick skin and confidence, the board and CEO should openly discuss controversial decisions and avoid arrogance.

"A CEO needs to remember they are still an employee and, like any other employee, have performance targets to attain. Some CEOs and some boards think they are infallible," Bailey says.

Mark Bilton, managing director for publicly listed fashion management firm POD (formerly Designer Textiles), says relationships between CEO and board can fray if the board can't follow the CEO's vision.

"A new managing director can be quite a learning curve for a board. The managing director's relationship with the chairman is absolutely critical," says Bilton.

He operates a "no surprises" policy with POD's board. "The chairman and I discuss the business a lot before board meetings so that he knows exactly where I stand."

Recruited from the private sector to effect change for POD, Bilton, 41, says though legal compliance and governance issues mean longer hours and more pressure for CEOs of public companies, there are compensations.

"It's a skill in its own right and makes you more marketable," he says.

Bailey and Bilton are both shareholders in the companies they lead which begs the question: are shareholding CEOs more forceful than salaried CEOs and do they more keenly challenge boards and shareholders to accept their decisions and strategies?

Bilton says ownership creates "an emotive element" for a CEO but a certain amount of tension between a board and its CEO is beneficial, providing the CEO does not own an excessive percentage of the business. Put another way, it is hard for a board to discipline or fire a CEO who owns 51 per cent of the company - a CEO with that much control could make a mockery of a board.

"Public companies work well if there is a certain amount of tension generated by well-diluted shareholders who hold a board accountable, a CEO who challenges the board to be open-minded, and a board that challenges, tests and questions the strategies the CEO presents," says Bilton.

Bailey says though he feels protective of Cadmus Technology, he is employed by all shareholders and is accountable to the board.

"If other shareholders say they want nil growth and a dividend now, well you have to work towards delivering that even if you have a personal agenda towards building something else that will deliver in the medium to long term," he says.

Bilton says there is little difference between what CEO, shareholders and the board want - a sustainable company that is doing well and growing - but disagreements arise around timeframes or business direction.

"We had quite an interesting AGM with slight conflict between some shareholders about where the company was going. Long-term shareholders who see a sudden change in the business can struggle and have an emotive response to that."

He says the way through these tricky periods, which include business turnarounds, new market focus, share-price fluctuations, and mergers and acquisitions, is to open up communications as much as possible in what is a competitively sensitive environment.

POD, which had a 79 per cent increase in share price last year, reports turnover quarterly by business unit and makes a large amount of governance and strategy information available on its website.

"You need to be open and transparent, warts and all. If the business is doing badly that should be on the table. Shareholders and staff respond to integrity whereas if you are playing smoke and mirrors no [investor] will take you seriously," says Bilton.

One of the challenges of leading a publicly listed company is the trade-off between the desire to present attractive short-term financial results to shareholders and the realities of long-term growth and investment. Decisions made around these trade-offs can be fraught.

Bailey says some shareholders take a while to realise there can't always be a short-term gain and CEOs and boards will usually make decisions that support a longer term strategic view.

Bilton says he will not cut the guts out of a business to make it look pretty on paper. "I make all my decisions on a medium term of 18 months-plus."

Some private sector CEOs echo these sentiments. Chris Weaver, CEO for the Auckland Racing Club, says though the club is not publicly listed, its 1434 members keep him accountable for changes within an industry that is their livelihood and passion.

"One of the beauties of not being publicly listed is that you can set down long-term investments over a three- to five-year horizon. That is better than public sector decisions to cut a marketing budget in the last three months of the financial year to deliver a better share market result."

Advice for the harried CEO

* Make business visions simple to understand, present and to buy into for board, staff and shareholders.

* Ensure you are passionate about these visions and believe in them personally.

* Be a good listener. Trust and respect the additional business management expertise of a board. Have confidence and be bold, but realise you can also learn and may need to compromise.

* Use as many channels as possible to communicate business decisions and the reasons for these decisions to shareholders without giving away too much information to competitors.

* Don't panic towards the end of the financial year by making budget cuts in mid to long-term investment areas. Stay on a steady course and grow an extra layer of skin to cope.