It’s not business as usual for the chairman

How does one conduct an orchestra, with a band of non-executive directors, who are experienced leaders in their own right, stakeholders, whose needs are ever-changing and global dynamics not captured in any text book?

What can the chairman do if fellow non executive directors are not performing?
These are some of the dilemmas that a modern chairman is facing.
Years back, the chairman was associated more with Board meetings and leading the board, and was seldom in the news.
Today, chairpersons are familiar characters, both inside and outside the organisation, for good, as well as the not so good reasons.

Corporate governance has evolved and continues to do so in response to economic challenges, which the corporate world is grappling with.
The chairman, the captain of the troubled ship must steer it out of the rough seas to continue with the journey.
It takes tact, experience, creativity and selflessness.
This means the chairman has to spend more time on day-to-day activities of the company, while being cautious not to overstep into the CEO’s territory.

It is no longer business as usual for chairpersons.
The volatility of the economic environment means that any day could bring trouble to the organisation.
Corporate governance expects to find the chairman ready to handle trouble, by discerning the correct actions to take and making the right decisions, in an instant.

Some have said that it is easier to be a CEO than being a chairman.
For instance a CEO chooses the members he wants to work with on his executive team.
The chairman on the other hand, does not always have a say on who should be on the board.
oard relations dynamics are increasingly outward focused, than inward.

This continues to be one of the major corporate governance challenges faced by organisations, as more and more “yes men” are preferred to performing and objective non executive directors.
A chairman could very well be in sight of the under performances on his board, but cannot take a unilateral decision to dismiss poor actors.
A CEO has authority to fire his executive members, or to reassign them, but the chairman will find it difficult as non-executive directors are elected by shareholders for a certain period of time.

Accountability is also complex as directors may feel more answerable to individual shareholders than the chairman.
The lighter side for the role of the chairman is that, unlike other non-executive directors, he/she works closely with the CEO.
The chair has more access to the CEO’s briefings, which can be regular enough to empower the chairman on the operational activities of the organisation.
Competence and character which, to a large extent depend on the chairman’s skills set, are the chairman’s surest assets in managing the business of the organisation and the board.

It is becoming more and more important for the chairpersons, to have similar or better skills sets than the chief executive office, as a base.
This is because the CEO/chairman relationship is the most important in ensuring that good governance prevails in the organisation, as well as healthy relations within the rest of the organisation. Some have called this relationship, sacred.

Both parties have to want to make this relationship to work for the good of the organisation, so the basic conditions of trust, loyalty and respect ought to be present.
A chairperson with a strong skills set will be confident enough to assert themselves as the leader, as well as be humble enough to learn and consult with the CEO, without being bullied.
A CEO with respect will also know what information and when to give it out and to whom.
“If there is any problem in the organisation, I want to hear it from the CEO”, is an operational motto of one experienced chairman, highlighting the importance of the CEO/Chairman relationship as well as setting the tempo for the interaction of these two parties.

On being further asked by the CEO Forum Group, on how important the relationship between the chairman and the CEO is, Tommie Bergman, an Australian business leader gave the following insight as quoted from www.ceofroum.co.au
It’s critical. You have to have mutual respect between the two parties, and both have to be honest and transparent with each other.

The chairman needs to provide clear objectives for the CEO, so the CEO knows at all time where he or she stands in relation to the board.
Where there’s a good relationship between the chairman and the CEO, there will be a lot of formal and informal exchanges of information.
In my case, I’ll speak to the CEO almost every second day about the business.

I make it clear that, as a chairman, I can deal with any issues or problems in the business, but I don’t want any surprises. If there is a problem with the business, I want to hear it from the CEO, not second-hand from someone else. We can then deal with it together, whatever it is.
I think as a chairman it is very important to make it clear to the CEO that you are there to help, and that you are a resource they can come to when they need to, almost as a mentor.

When the relationship is working well, it is very satisfying for both parties and the board functions far more effectively.
Issues that have the potential to cause controversy at the board level, for example, can often be handled much more smoothly where the CEO and chairman work well together.”
It is a common corporate practice that CEOs also hold non-executive positions elsewhere outside their places of employment.

In fact former CEOs tend to be an almost obvious choice for chairmanship.
This is because they already have experience in leadership or industry.
In the UK, it used to be usual for outgoing chief executives to move straight into the role of chairman, now the nominations committees of large quoted groups, prefer candidates with wider experience, according to a report in the Financial Times.

Changing times are calling for changes in roles and actions.
These changes are meant to capture signs of the times in corporate governance, that the role of the chairman can no longer be confined to a board, but a collection of stakeholders.
While industry experience is important, others, such as in global experience are fast becoming an asset in chairpersons, as the world economy look east to China and others such as Brazil, Russia, India and South Africa, the BRICS.

Signs of the times in UK corporate governance are marked by many developments, such as the Financial Services Authority’s recent report on the near collapse of the Royal Bank of Scotland.
The report, among other recommendations, proposes to look at banning executives of failed banks from future positions of responsibility, or changes to remuneration to ensure that a very significant proportion of executives pay is deferred and forfeited if a bank fails.

Such pressure is now making it harder for chief executives to hold both executive and non-executive roles, since both roles are becoming more time-consuming.