The Role of the Chair

1. The role of the Chair in a nutshell:

Good Boards are created by good Chairs. The Chair creates the conditions for effective Boards and the effectiveness of individual Directors including the Non-Executive Directors (NEDs).

The UK Corporate Governance Code states: “The Chair leads the Board and is responsible for its overall effectiveness in directing the company. He/she should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the Chair facilitates constructive Board relations and the effective contribution of all Non-Executive Directors, and ensures that Directors receive accurate, timely and clear information.”  

2. The essential role of a Chair are:

• The Chair should be independent on appointment.
• The Chair is responsible for clear leadership of the Board, ensuring its effectiveness in all aspects including that it functions effectively.
• The roles of the Chair and CEO should not be exercised by the same individual.
• The CEO should not become Chair of the same company. If exceptionally, this is proposed by the Board, major shareholders should be consulted ahead of the appointment.
• To have adequate separation from the day-to-day business, to be able to make independent decisions.
• Not to remain in post beyond nine years.
• To use open advertising and/or an external Search consultancy for the appointment of a new Chair.
• The Chair is responsible for setting the Board Agenda and ensuring that Directors receive accurate, timely and clear information. The Board pack should be primarily focused on the key issues such as strategy, operational performance, the finances and company values (culture). The Chair must ensure a high-quality Board Pack with strong use of executive summaries is distributed well ahead of Board Meetings.
• To conduct Board meetings effectively getting all Directors including the NEDs involved in the Board’s work and ensuring the Board focuses on its key tasks. They should not be long drawn-out affairs which waste time and sap energy. Short meetings with a focus on key strategic and Governance issues are the ones which work best.
• To demonstrate the highest standards of integrity and probity, and set clear expectations concerning the company’s culture, values and behaviours, and the style and tone of Board discussions.
• To take responsibility for the Board’s composition, development and succession planning.
• To ensure strong ethics, good corporate culture and that the Board sets the example for the whole organisation in terms of behaviours, ethics and values.
• The Chair of each Board Sub-Committee (Audit, Risk, Remuneration, Nomination, Corporate Social Responsibility etc) should ideally be a Non-Executive Director rather than the company’s Chair.
• The Chair can be an Executive (full time) Chair or a Non-Executive (part time) Chair.
• Not have more than two Chair roles.

3. What makes an effective Chair?

Being a good Chair requires considerable skills including:

• Creating the right Board ‘dynamic’ and ‘culture’ - just how open to constructive challenge and debate are we? Is everyone heard? How far down is visible? It is all about team dynamics and harmony but not overly cosy.
• Contributing to and challenging the company’s strategy.
• Striking the right balance of confidence and humility.
• Constructively challenging and providing strong levels of oversight of the CEO and Executive team performance.
• Being happy for others to take the credit.
• Putting the company’s interest ahead of everything else.
• An innate ability to “do unto others as you would have done unto you” as productive business is all about relationships.
• An independent Chair is fundamental as a counterweight to a strong-willed or overly dominant CEO.
• A poor or weak Chair will result in poor leadership of the Board and can come about through:
  • Not being involved enough in the business &/or being too busy on other commitments
  • Being too domineering, arrogant or unapproachable.
  • An inability to lead the Board in reaching major decisions.
  • Poor communication skills.
  • The Non-Executive Directors, led by the Senior Independent Director, should be responsible for evaluating the performance of the Chair, as part of the annual Board Evaluation.
  • An effective Chair is essential for a company to be effective - the fish rots from the head.

The principal considerations of the Board Chair role are clear...the difficulty is putting them into practice!

Areas where Boards are not working well are generally due to a lack of trust and respect plus either the wrong or ineffective Chair &/or Non Execs.

4. The Chair should:

• Display strong leadership, ensuring a clear vision and focus on strategy for the organisation using the expertise and input of all Board members.
• Act as a buffer between the CEO and other Board members as well as investors and external shareholders. For this reason, it is important that the Chair is truly independent and not inappropriately aligned to the CEO.
• Have the ability to effectively listen to and support the CEO and not constantly second-guess him/her or try to run the company which is the CEO’s job.
• Ensure that the Non Execs are truly independent so that they can function and challenge effectively.
• Promote a culture of openness and debate by facilitating the effective contribution of all Directors including the Non Execs.
• Ensure constructive relations between Executives and Non Execs.
• Ensure effective communication with shareholders and other stakeholders.
• Hold periodic meetings with the Non-Executive Directors without the executives present.
• Prepare a Corporate Governance statement which should articulate the Chair’s role.
• Ensure that new Directors receive a full, formal and tailored induction on joining the Board.
• Understand the business through a deep commitment of time and energy to the Board and company.
• Be a good listener as well as something of a diplomat if the going gets tough. A good Chair keeps Board Meetings short and to the point.
• Carry out regular Board Evaluations or Reviews either internally or externally and act on its recommendations; smaller companies should consider mini internal Evaluations.

Summary

Good Boards are created by good Chairs and a good Chair is crucial to the effective running of the Board. An effective Board is in turn crucial to the success of the company.

The Chair creates the conditions for effective Boards and the effectiveness of individual Directors. It is the responsibility of the Chair to lead the Board - the CEO leads the company.

The Chair should provide strong but not dominant leadership, whilst encouraging all Board members to contribute and robustly debate all key issues. He/she must ensure the effective implementation of Board decisions.