There is often confusion around the roles and responsibilities of company leaders. In particular, one very critical relationship can suffer from the lack of clarity regarding duties and responsibilities and create friction and impaired productivity - or worse - at the highest levels: Chairman and CEO.
Overall, the CEO leads internally, with the Chairman adding value in strategy and structure and ensuring that the company is represented with integrity and influence to institutions, analysts and other stakeholders. The Chairman is there to support the CEO, and both need regular and structured access to the Executive and management team. Clearly, the Chairman must also be prepared to step in if deemed appropriate.
It is absolutely critical that this Chairman / CEO interface is working and is seen to work (this is why there is a danger in the chairman and CEO being one and the same). Otherwise this dysfunctionality will affect the Board performance and the wider relationships between the Executive and Non-Executive Directors. Some of the more common reasons for the relationship going wrong can include:
- An imbalance in power
- Critical issue of external representation
- Critical issue of internal access
- Lack of mature judgement and flexibility
- Lack of ability to conflict and confront
A meeting of minds
Ideally, the CEO/Chairman relationship is complementary and dynamic, and both parties have clarity on their involvement, accountability and remit.
Where there is a well developed relationship of mutual respect, there will be regular contact between the Chairman and Chief Executive that allows for much greater reciprocal understanding and clarity of communication. The role of the Chief Executive is often isolated and a strong relationship with the Chairman also provides a “sounding board” to test and debate new thinking and to air concerns and worries that cannot be shared with others in the Executive team.
For this to work effectively there must be a high degree of trust and confidence that the Chairman is not seeking to be a surrogate Chief Executive. Other attributes of a good Chairman include:
- Mature, internal compass of values, integrity and judgements
- Long-term strategic perspective
- Unconditional positive regard for others
- Creative, curious and challenging
- Ability to master the brief
- Ability to weather crises
- Leader for different seasons
Mastering the role
CEO, Chairman and Non-Executive Director roles each have a commonly-accepted set of duties and responsibilities. Whilst there will be differences as a result of size, listing status and investor mix, these are the normal guidelines in the UK.
The Role of Chairman
The responsibilities of the Chairman expressly include:
Running the Board and ensuring its effectiveness in all aspects of its role
- Chairing the Board and general meetings and relevant Board committees
- Setting the Board agenda
- Ensuring there is an appropriate delegation of authority from the Board to executive management
- Ensuring the Board receives timely and accurate information to enable the Board to take sound decisions and monitor effectively and provide advice to promote the success of the Group
- Managing the Board to allow time for discussion of complex or contentious issues
- Ensuring the effective contribution and performance of all members of the Board
- Facilitating the effective contribution of Non-Executive Directors
- Ensuring constructive relations between the Executive and Non-Executive Directors
- Identifying the development needs of the Board to enhance its overall effectiveness as a team
- Ensuring the performance of the Board, its Committees and individual Directors is evaluated regularly and acting on the results of such evaluation
- Maintaining sufficient and effective communication with shareholders
- Ensuring effective communications with shareholders including at general meetings
- Maintaining sufficient contact with major shareholders to understand their issues and concerns
- Ensuring that the views of shareholders are communicated to the Board
- Upholding standards of integrity and probity
- Setting the tone of Board discussions to promote effective decision making and constructive debate
- Ensuring the Board is fully informed on all issues of relevance
- Ensuring effective implementation of Board decisions
- Building an effective Board
- Providing coherent leadership of the Group
The Role of Chief Executive Officer
The Chief Executive Officer is responsible, within the authority limits delegated to him by the Board for:
- Business strategy and management
- Developing Group objectives and strategy having regard to the Group’s responsibilities to its shareholders, employees and other stakeholders
- Achievement of agreed objectives and execution of strategy
- Recommending to the Board the annual budget and ensuring its achievement following Board approval
- Optimising the use and adequacy of Group resources
- Investment and financing
- The recommendation to the Board of all investments and capital expenditure which are material in a group context
- Identifying and executing acquisitions and disposals following Board approval
- Leading geographic diversification initiatives
- Identifying and exploring new business opportunities
- Risk management and controls
- Managing the Group’s risk profile
- Ensuring appropriate internal controls are in place
- Communication
- Providing a means for accurate and timely disclosure of information in accordance with applicable legal requirements
- Ensuring effective communication with shareholders
- Board and committees
- Making recommendations on remuneration policy
- Making recommendations as necessary to Board committees including Group HR policies, management development, and succession planning for the Executive team and the appointment and termination of employment of members of that team
- General
- Leading the senior executive team in the day-to-
day running of the business - Ensuring effective implementation of Board
decisions - Reviewing the operational performance and
strategic direction of the Group’s business - Reviewing the Group’s organisational structure
and recommending changes where appropriate - Keeping the Chairman and the Board informed on
all important matters
Role of Non-Executive Director
Independent (or Non-Executive) Directors are primarily valued for their objective judgement of corporate affairs. They need knowledge of the technical and legal aspects of directorship and may have a specific skill that can be exercised from time to time. But for the most part, their contribution will be rated by their overall knowledge and wisdom.
Judgement cannot be learned from reading a book or attending a course - neither can wisdom. The best course for anyone wishing to become an independent Director is to build on their own business experience and develop judgement by exposing and testing this knowledge and experience in many different situations and learning from a wide cross-section of individuals.
An independent Director legally bears the same responsibilities as the Executive Directors, but achieves effectiveness by influencing decisions rather than controlling operations.
The field of independent directorship is in no way risk free; it should not be entered lightly. It carries significant exposures, of financial liability, possible disqualification, and consequential damage to future careers.
No comments:
Post a Comment