Ann: CEO Termination, page-18

When the board does make the decision to dismiss the CEO, there generally two major reasons:

1. A sudden crisis involving the CEO such as a breach of the law or the organisation’s code of conduct or actions that are so damaging to the organisation and its reputation that the CEO must be removed.
2. Ongoing pattern of non-performance, e.g.
   – Failure to live up to the agreed-upon standards of performance;
   – Inability to fit into the culture of the organisation or lead effectively; or
   – Inability to implement the agreed strategy or adapt to a changing environment, which is often the case in the non-profit sector.
   
   
   Many organisations now contract their CEOs on a continuing contract, but subject to the board having the power to terminate the contract for either any disclosed reason or non-disclosed reason, upon a notice period, often either 3 or 6 months.
   
   
   
   In addition to the normal CEO assessment process, which should provide feedback from the board and the CEO’s direct reports, the board is responsible for ensuring there is a process to bring any issues with the CEO’s performance to them as soon as they occur, for example, workplace bullying accusations or loss of a major contract. In other words, the board should provide the CEO with real-time feedback.
   
   
   
   Should the board not be satisfied with the CEO’s actions on these matters, it will need to investigate the problems further to find their causes. If these investigations reveal that the CEO is not handling the job well, the board may need to take a more active role in the strategic and functional operation of the organisation. The CEO will need to be set clear objectives and have the consequences of their actions clearly outlined.
   
   
   
   By this stage, it is not uncommon for the CEO to realise that the problem is escalating out of their control and the CEO may offer to resign. Alternatively, the board will need to act decisively to limit damage should they need to remove a CEO.