The Most Consequential Relationship in Business:

Why CEOs and Boards Struggle to Get It Right

Mary Kelly Leadership Economist | Keynote Speaker | Conference & Training Programs

In the first half of 2025, 42 percent of departing CEOs were forced out or fired, according to data from Exechange. Not resigned, not retired, not transitioned in an orderly succession, just forced out. And behind nearly every one of those exits is a version of the same story: the relationship between the CEO and the board of directors broke down.

The numbers behind the CEO/Board relationship breakdown are striking.

• 42% of departing CEOs in H1 2025 were forced out or fired (Exechange).
• 1,991 CEO departures in 2024, up 16% year-over-year, including Intel, Starbucks, Boeing, Nike, and CVS.
• A record 27 CEOs ousted by activist campaigns in 2024 (Barclays).
• McKinsey: nearly half of forced CEO departures linked to board relationship breakdown, ethics, or cultural misalignment, not financial performance.
• LeadershipIQ: boards cite poor change management (31%), ignoring customers (28%), and denying reality (23%) as top firing reasons, not missed earnings.
• Internal CEOs serve 8.7 years vs. 7.3 years for external hires, a trust premium, not a competence gap.
• Only 13% of directors rate their board reporting materials as “extremely effective” (NACD).
• A forced CEO ouster versus planned succession costs an average $1.8 billion in lost shareholder value.

Let’s discuss the facts. Approximately 1,991 CEOs left their positions in 2024, a 16 percent increase over 2023, including high-profile forced departures at Intel, Starbucks, Boeing, Nike, and CVS. A record 27 CEOs were ousted directly as a result of activist campaigns in 2024, according to Barclays, following a 22 percent surge in activism in the first half of that year. And research from McKinsey found that nearly half of all forced CEO departures are linked not to financial performance, but to deeper issues: ethics violations, poor board relationships, or cultural misalignment.

The board-CEO relationship is the most consequential and least-discussed dynamic in corporate governance. When it works, it is a force multiplier for everything the organization is trying to do. When it fails, it does not just end a CEO’s tenure, it can destabilize an entire organization, destroy shareholder value, and leave a leadership void that takes years to fill.

A relationship unlike any other in business

Nothing in a CEO’s prior career prepares them for the specific dynamic of governing with a board. Throughout their career, they learned to manage down, influence peers laterally, and report upward to a single boss or leadership team. The board relationship is categorically different from all of those.

Board members are not employees. They are not peers. They cannot be managed in any conventional sense. They are fiduciaries. Legally accountable to shareholders with their own histories, incentives, expertise, and relationships with each other that often predate the CEO’s appointment by years or decades. They convene periodically rather than operating daily. They have authority over the CEO’s continued employment while simultaneously depending on the CEO for virtually all of their operational information about the company they govern. The structural tension in that arrangement is built in, and it never entirely goes away.

What makes this relationship so difficult to navigate is that success requires skills that are nearly impossible to develop before you need them. Managing information flow to a board without filtering inappropriately. Building trust with directors who are evaluating your performance while you present to them. Navigating disagreement without triggering a confidence crisis. Projecting appropriate certainty without creating a culture where the board stops pushing back. These capabilities must be developed under live fire, with tenure on the line.

What the data says about why CEOs actually get fired

The conventional story about CEO exits focuses on financial performance: missed targets, declining stock prices, lost market share. The data tells a more complicated story. A multi-year study by LeadershipIQ, drawing on interviews with 1,087 board members from 286 organizations that had forced out a CEO found that financial performance was rarely the primary driver.

The top reasons boards pushed out their CEOs were poor change management, cited by 31 percent of board members; ignoring customers, at 28 percent; tolerating low performers, at 27 percent; denying reality, at 23 percent; and too much talk without enough action, at 22 percent.

The pattern running through those findings is not incompetence. It is a failure of trust. Boards that lose confidence in a CEO’s judgment, candor, or self-awareness will move against them even when financial results are acceptable. Conversely, boards that trust their CEO’s character and clarity of thinking will give significantly more latitude when results disappoint. The relationship is the foundation. When it cracks, the financial metrics become the excuse rather than the cause.

A PwC Strategy& analysis reinforced this, finding that nearly one in three CEOs are dismissed within their first 18 months, primarily due to strategic missteps, cultural misalignment, or ethics concerns rather than financial underperformance. These are precisely the months when the board relationship is still forming, when communication patterns are being established, and when the new CEO has the least institutional credibility to draw on.

The information problem that neither side fully acknowledges

One of the most structurally corrosive dynamics in the board-CEO relationship is the information asymmetry built into it. The CEO controls, by necessity, virtually all of the operational information that reaches the board. Board members see what they are shown. They read the materials prepared for them. And even with the best intentions on all sides, what reaches the board is filtered by what the CEO thinks is relevant, by what the organization believes the board wants to see, and by the natural human tendency to present information in the most favorable light available.

This creates a structural vulnerability. Boards that are not receiving candid, complete information cannot provide effective oversight. And when they discover the picture they were given was rosier than reality, as boards almost always do eventually, the trust damage is severe and often irreparable. The NACD’s 2024 Board Practices and Oversight Survey found that only 13 percent of directors rate their board reporting materials as extremely effective, suggesting that the information quality problem is broadly recognized but not broadly solved.

Russell Reynolds’ governance research identified this dynamic explicitly, noting that increasing board involvement in strategic discussions is creating tension with CEOs who are “reasonably sensitive to overreach.” Directors want deeper engagement; CEOs want appropriate operational autonomy. The line between those two legitimate interests is never perfectly clear, and navigating it requires ongoing communication that many board-CEO relationships do not prioritize until already strained.

The tenure gap that reveals the trust premium

One of the clearest data points on the importance of the board relationship comes from Russell Reynolds’ analysis of CEO tenure by appointment type. Internally promoted CEOs serve an average of 8.7 years. Externally hired CEOs average 7.3 years. That nearly 20 percent difference in tenure is not primarily explained by competence. Both groups were selected by sophisticated boards after rigorous evaluation. The difference is explained by trust.

Internal CEOs arrive with established board relationships, a track record directors have observed directly, and cultural fluency built over years inside the organization. External CEOs arrive with none of that foundation. They are asked to navigate one of the most complex relationships in business with the people who can remove them at any time, having just met. The early months of an external CEO’s tenure, when the board relationship foundation is being built, are also when they are most vulnerable to the misunderstandings, communication gaps, and expectation mismatches that erode confidence.

This is why CEOs who invest early and deliberately in board relationships outperform those who treat board management as an administrative function. The relationship is not peripheral to the job. It is central to how long and how effectively the job gets done.

When activist pressure enters the room

The board-CEO relationship has become measurably harder because a third party now frequently sits in the room: the activist investor. In 2024, over 70 percent of directors reported their boards had taken action in response to actual or potential shareholder activism, according to Russell Reynolds. Activist campaigns were up 22 percent in the first half of that year alone. And the pressure those campaigns apply lands directly on the board-CEO relationship.

When activists target a company, they typically do two things simultaneously: apply public pressure on the board to act, and undermine confidence in the CEO’s leadership. Even boards that believe in their CEO’s strategy find it difficult to hold that position when activists are publicly framing the CEO as the problem. Over 20 percent of CEOs targeted in activist campaigns resigned within a year, compared to an 11 percent average annual turnover rate across the broader market. The pattern is clear: activist pressure accelerates board-CEO relationship failure, often before the underlying strategic disagreement can be meaningfully resolved.

The cost of those forced exits extends well beyond the separation payment. Research cited by Bloomberg found that a CEO ouster versus a planned succession costs companies an average of $1.8 billion in lost shareholder value. The median forced-out CEO received $6.2 million in separation in 2024. And the organizations left behind face months of strategic uncertainty, team instability, and the challenge of recruiting a successor under conditions that signal distress to the entire market.

The divergence in perspective that never quite goes away

Even in healthy board-CEO relationships, a persistent gap in perspective is the norm. PwC’s 2024 Board Effectiveness Survey of more than 500 executives found that only 35 percent of executives rated their boards as excellent or good. The divergence shows up in consistent patterns: boards often believe they are providing strategic support while CEOs experience that same involvement as micromanagement. CEOs often believe they are communicating transparently while boards feel they are receiving an incomplete picture.

Perhaps most strikingly, a record-high 40 percent of CIOs rated their boards’ effectiveness as poor in the 2024 survey, driven by a persistent knowledge gap on technology. As digital transformation, AI adoption, and cybersecurity become central strategic issues, the expertise gap between what CEOs and their teams understand and what boards can meaningfully engage with has widened considerably. That gap breeds frustration on both sides and creates conditions where the board-CEO relationship deteriorates not through bad faith, but through different operating realities.

What it actually takes to get the relationship right

The boards and CEOs that navigate this relationship well share practices that are less about governance structure and more about deliberate relationship-building. They invest in communication between board meetings, not just during them. They establish explicit norms around what kinds of disagreement are healthy and expected. They create channels through which the CEO can receive honest feedback without that feedback being interpreted as a loss of confidence. And they treat the board-CEO relationship as something requiring active maintenance, not just formal compliance.

For CEOs specifically, the research points to several practices that predict longer and more effective tenures: coming to the board with problems as well as solutions, not waiting until situations are resolved to inform directors but bringing them into difficult decisions while there is still time to shape outcomes. Building individual relationships with board members outside formal meetings, creating personal trust that holds when performance is under pressure. And actively soliciting the board’s input on strategy rather than presenting finished plans for ratification — because boards that feel like strategic partners are far less likely to become adversaries when things get hard.

For boards, the data points equally clearly toward a more active role in the success of the CEO they have appointed. The Conference Board’s governance research shows that boards which treat CEO development as an ongoing responsibility, providing coaching, honest performance feedback, and structured support during the critical first two years, see significantly better outcomes. The job of the board is not merely to evaluate the CEO. It is to create the conditions under which the CEO can succeed. Those are different things, and the distinction matters enormously.

The bottom line

The board-CEO relationship is not a governance formality. It is the single most consequential working relationship in any organization, and it is failing at record rates. Nearly half of CEO departures involve relationship breakdown rather than financial failure. Tenure is shrinking. Forced exits are costing companies billions. And the conditions driving this; activist pressure, increasing complexity, widening expertise gaps, and the structural difficulty of the relationship itself are not getting easier.

Organizations that take this seriously will invest in building this relationship the way they invest in any other strategic capability: with intention, resources, and a clear-eyed view of what good actually looks like. The alternative is continuing to pay the price of getting it wrong; in turnover, in shareholder value, and in the organizational instability that follows every leadership transition that could have been prevented.

Your organization cannot afford to get this wrong. Need help? We address this in more depth in our new book, Leadership is Tough: Skills. Disciplines. Decisions. What Great Leaders Do Differently, available here on Amazon. You can also contact Mary at Mary@ProductiveLeaders.com for a complimentary advisory session.