Question

. Read the case study and then answer the questions that follow.

Case Study: Abby Milroy has been the CEO of Ocean Cove Hospital and Medical Center for almost 10 years and has been very effective. She is trusted by the board of trustees (BOT) and has been given wide latitude in decision making, including regarding capital expenditures. Tom Crane, the chair of the BOT is more than 80 years old and has served as chair for more than 20 years. He and Milroy have an excellent working relationship and often socialize.

When the Crane told Milroy he was planning to retire, Milroy decided to approach him with a proposal to combine the positions of chair of the BOT and CEO into one upon his retirement; she would be the first to hold the combined position. Milroy emphasized to Crane that the corporate, for-profit world has long used the model she is proposing because of its inherent decision-making efficiencies. This models also offers a much better bridge to connect senior management and governance, she explained.

If approved, Milroy’s new title would be chair of the board and CEO of Ocean Cove Hospital and Medical Center. In that capacity, she would lead BOT meetings and have the authority that the BOT bylaws give the current chair. In addition, Milroy would function as the CEO of the organization and direct the activities of managers and staff.

Crane reacted favorably to the proposal; he agreed to speak to the board about it. His informal meeting with other board members produced a mixed response. Crane decided to consider the proposal further.

Questions: Identify and compare the functions of the CEO and senior management with those of the BOT. What three reasons might members of the community served by Ocean Cove Hospital have to object to the proposal? Name three reasons members of the community might support the proposal.

Answer 1

Pages 72–73 of the text detail the responsibilities and functions of the CEO. Those of the BOT are detailed on pp. 66–67. In summary, the BOT (governance) determines the “right thing” (mission [strategic direction]), and the CEO (and subordinate managers) determines the “right way” (implementation [tactics]).

Several reasons why a CEO would also want to be chair of the BOT

a. Eases decision making

b. Diminishes need for consultation and group decision making

c. Provides immediate/shorter decision-making cycle(s)

d. Reduces oversight of performance and questions/second-guessing

e. The combined responsibilities enhance the person’s leadership position

f. Psychological and political rewards for the incumbent of the combined positions

g. May justify a high salary because of increased responsibilities