The most important corporate metric for CEOs does not appear on any financial statement

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeLegal PostWorkThe most important corporate metric for CEOs does not appear on any financial statementConfidence in a CEO cannot be reduced to a spreadsheetLast updated 9 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.Most executive departures are not caused by a single event. They are caused by the gradual accumulation of concerns that eventually alter the board’s assessment of the future. Photo by Nemanja /Stock.adobe.comEvery quarter, boards receive an extraordinary amount of information. Revenue. Profitability. Cash flow. Market share. Forecasts. Operational metrics. Risk assessments. Management presentations.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe modern corporation measures almost everything — and with AI, more than ever.Yet the most important metric in many organizations is rarely measured: confidence.Not investor confidence; board confidence. More specifically, board confidence in senior management.FP Work touches on HR strategy, labour economics, office culture, technology and more.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Work will soon be in your inbox.We encountered an issue signing you up. Please try againUnlike financial performance, confidence cannot be reduced to a spreadsheet.There is no dashboard, no quarterly report, no benchmark against competitors, no percentage attached to it.Yet confidence may be the single most important predictor of whether a chief executive and other C-suite executives remain employed.The curious thing is that most executives never see it changing.A CEO receives reports on sales, margins, costs and productivity. No comparable report arrives stating: “Board confidence in management has declined materially during the past 12 months.”Indeed, directors themselves would struggle to identify the precise moment confidence begins to erode.That is because, in my experience, confidence rarely collapses. It drifts.A strategic initiative takes longer than expected. An acquisition underperforms. An investor becomes dissatisfied. A governance issue emerges. A valued key executive departs. A forecast is missed.None of these events may be significant in isolation. Collectively, however, they alter perceptions — not necessarily of competence, but certainly of confidence.That distinction is critical.Most executive departures are not caused by a single event. They are caused by the gradual accumulation of concerns that eventually alter the board’s assessment of the future.This often surprises executives.The event that becomes public — a disappointing quarter, a failed transaction or an investigation — is frequently viewed as the cause of the departure, usually by the executives themselves.In reality, it may merely be the moment when a much earlier loss of confidence becomes visible.Experienced directors understand this phenomenon.The board’s most difficult decisions rarely involve evaluating the past but assessing the future.A board may acknowledge that a chief executive has performed admirably and still conclude that a different leader is required for the business’ next phase.The founder who built the company may not be the ideal person to institutionalize it. The turnaround specialist may not be the optimal growth leader. The aggressive acquirer may not be the right steward of a mature company. The role executives are brought in to perform may become less important to the board.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The executive may not have failed; the board’s confidence may simply have shifted from one vision of the future to another.This is where governance becomes both art and science.Financial results are objective. Confidence is not.Directors evaluate judgment, credibility, adaptability, communication, leadership depth, succession planning and strategic vision. Those assessments are inherently subjective.Yet they often determine outcomes far more consequential than any quarterly earnings report.This creates a challenge for boards. How candid should directors be when confidence begins to weaken?Too little communication can leave management blindsided. Too much can create instability and distraction. Many boards struggle to strike the proper balance.The challenge is equally significant for executives.The higher leaders rise, the fewer people are willing to deliver uncomfortable truths.Subordinates hesitate. Advisors are cautious. The directors may be reluctant to voice concerns until those concerns have become difficult to ignore.The result is that highly accomplished executives sometimes possess less accurate information about their own standing than the people who report to them.That irony is one of corporate life’s least appreciated realities.It also explains why some executive departures appear so sudden and why the executives are surprised when they occur.For the board, the discussion has often been underway for months. To the executive, the announcement may feel abrupt.Both perceptions can be accurate.There is an important legal dimension to this phenomenon.By the time confidence has visibly deteriorated, the board may already be considering succession plans, leadership transitions, changes in compensation structures, revised reporting relationships or separation scenarios.The most significant employment issues affecting senior executives rarely arise after a decision has been made. They arise while confidence is waning.That is often the period when leverage is greatest, options are broadest and outcomes remain most flexible.For boards, understanding these dynamics can help avoid unnecessary conflict and poorly managed transitions. For executives, it is even more important.Financial statements reveal the health of a corporation; they reveal remarkably little about the confidence that ultimately determines who leads it.And in many organizations, that invisible metric proves more consequential than any number appearing on the balance sheet.Howard Levitt is senior partner of Levitt LLP, leading his teams of labour lawyers in Ontario, Alberta and British Columbia. Howard has appeared in more Supreme Court employment law cases and provincial appeals than any lawyer in Canadian history. A bestselling author, he discusses current workplace issues on the podcast, At Work with Howard Levitt.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.