Qualities that make for a great chair

BY Jayashantha Jayawardhana

Most board chairpersons are seasoned business leaders. Half of those heading S&P 500 companies are also the CEOs in their organisations and the vast majority of the rest are former CEOs.

But there are problems when the CEO and board chair is one and the same. And there are also problems when the two posts are held by different people.

When the CEO and chairperson is the same person, there’s no room for checks by the latter on the work of the former. And when the posts are held by different people, in the event the CEO falls short of the chair’s expectations, the latter may begin to act as the alternative CEO, and sow conflict and confusion among senior management.

Both scenarios have the potential to raise equally difficult but completely different problems.

So what are the good practices for a board chairperson, and how do they differ from the traditional practices of CEOs and senior executives?

To explore the answers to these questions, the INSEAD Corporate Governance Centre undertook a research project that included a survey of 200 board chairpersons from 31 countries, and conducted 80 interviews with chairs and 60 with board members, shareholders and CEOs.

Despite some contextual differences, there was a remarkable consensus on what makes a good chairperson. The primary distinction between the board chair and CEO is that while the former is responsible for and represents the board, the latter is expected to be the public face of the company.

Drawing on insights from the research findings, Senior Affiliate Professor of Entrepreneurship and Family Enterprise at INSEAD Stanislav Shekshnia outlines eight core principles that can guide a chairperson.

GUIDING Over 85 percent of the board chairs surveyed had formerly been CEOs themselves. The majority of CEOs are used to taking centre stage as the public face of their companies. They thrive on formulating a vision, making aggressive moves, issuing orders, speaking and presenting in public, and setting examples.

Upon becoming board chairs, they had to act with restraint. In fact, effective chairpersons speak little, and their interventions are focussed on processes and people rather than content.

TEAMING A former CEO of an international retail chain in the UK tried hard to apply his team building approach to the first board he chaired. When his efforts were met with opposition, he realised that his board members weren’t a traditional team.

They spent little time together (between four and six board meetings a year, in addition to some committee meetings and phone calls), and each member typically served on more than one board. Most had a different full-time job.

So he went from team building to teaming, and brought together experts in a temporary group to solve problems they may be encountering for the first and only time. This yielded great results.

PREPPING A novice chair may think that the job is about managing the dynamics in a boardroom. But seasoned chairpersons know that this is only the tip of the iceberg.

A good portion of a board chair’s time goes into setting an agenda and a briefing package. He or she has to do all the preparatory work for that.

WORKING Experienced chairs concur that work on committees is pivotal to a board’s success.

For example, one leading diversified conglomerate in Sri Lanka has several board committees – namely audit, nomination, remuneration, recoveries and related party transaction committees.

FACILITATING Executive time is valuable. A board meeting must follow the agenda and achieve the relevant objectives set for it.

If the chairperson takes much of that time to air his or her strong views on a particular subject, it won’t be fruitful. A board chair must be a facilitator rather than a player.

MEASURING The decisions a board makes today will set the course of the company for decades to come. One seasoned chair says: “It is naive to think that we can find a metric or a set of metrics to apply at the end of the year to tell us how effective the board has been.”

For him, five inputs are momentous: people, board agendas, materials, processes and minutes. He always ensures they’re perfect.

BOSSING Effective board chairs know better than to try and be the CEO’s boss. They understand that the board is the collective ‘boss’ of the CEO, and the role of the chairperson is to ensure the board provides the goals, resources, rules and accountability the chief executive needs.

A chairperson also represents the board with shareholders. If a CEO’s boss is the board, its bosses are the shareholders. Given that the chair is the primary interface between these parties, he or she always represents the collective voice of the board in all shareholder matters.