The role of a chairman
What should your chairman do for your business? Experienced CEO, chairman and director David Soskin dissects the role – and examines the key attributes needed for success
What should your chairman do for your business? Experienced CEO, chairman and director David Soskin dissects the role – and examines the key attributes needed for success.
Few stories about corporate Britain have caused as much uproar in recent years as Sir Stuart Rose's move to make himself chairman as well as CEO of Marks & Spencer in 2008. As soon as the appointment was announced, a major shareholder revolt developed.
One of the core principles of good corporate governance – embodied in the so-called ‘Combined Code' – is that quoted companies should split the chairman and chief executive roles. Britain is poor at a number of things: World Cup football, getting trains to run on time and predictable weather. But it is generally acknowledged that in matters of corporate governance Britain is a world leader.
The independent chairman role is fundamental to this as a counterweight to strong-willed CEOs. The former's role is to represent the interest of all shareholders. As such it is as helpful to private companies as it is to public ones – providing the appointment is the right one.
What might you expect from a good chairman? Here are some highlights drawn from my own experience as a board chairman, a company director and a CEO. The chairman should: Act as a buffer between the CEO and other board members as well as investors. For this reason, it is important that the chairman is truly independent and not a crony of the CEO. Investors should be alert to the dangers of a board packed with the CEO's appointees. In venture-backed businesses there are often stresses between investors and executives. The chairman's role is to resolve such differences in the most constructive way. Be neutral. I once sat on a board with a chairman who tried to persuade the company (unsuccessfully) to merge with another venture in which he was involved. He seemed oblivious to the conflict of interest.
Understand the business. On one new media board on which I sat there was (briefly) a chairman from outside the digital industry. I am sure he was very good at his previous job. But, as chairman of a fast-growing online business he simply lacked the necessary experience. That is not to say the chairman should constantly second-guess the CEO or try to run the company; that is the CEO's job. But a good chairman can help create the strategic vision and be a sounding board for the CEO.
Ensure that board meetings take place regularly and that the views of all board members are properly aired. That means being a good listener as well as something of a diplomat if the going gets rough. A good chairman keeps board meetings short, sweet and to the point. 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.
Insist that proper governance standards are met. For instance, proper management accounts should be produced regularly. This is not easy in early-stage companies with slim resources, but crucial for the health of the business. When I worked at FTSE 100 company Redland the chairman sent out the board papers a week ahead of the meeting. Any papers missing the deadline had to wait until the next meeting. This is good practice: board members are prepared and are not bamboozled by a plethora of last minute information. It makes for more effective discussion.
Be well connected and able to help companies access customers, the right advisers and possible business partners. There is a perception that chairmen are a ‘nice to have' but not essential component of a well-run business. Nothing could be further from the truth.