Historically, many companies have appointed the CEO to the position of Chairman of the Board. The financial marketplace is evolving like never before. Economic, technology and risk management trends are all inspiring new trends in modern governance. One of the biggest recent trends is the insistence by shareholders for companies to separate the CEO and Chairman of the Board positions.
The United States has moved a little slower in this regard, but the trend in separating the roles is increasing. Many companies in the U.S. will be switching to this model for the first time. Companies will have to adapt and adjust the duties and accountabilities of their leadership.
Proxy shareholder firms are encouraging the change. Institutional Shareholder Services (ISS) is recommending that companies separate the CEO and Chair positions. ISS especially encourages companies to split the roles when companies are experiencing “problematic performance, governance or management issues.” Ironically, most U.S. companies can identify with that phrase to some extent. Most Fortune 500 companies have already split the two roles.
The duties and Chairperson of the Board responsibilities aren’t consistent across companies or even across industries. Thinking beyond the basic concept that the CEO handles all management duties and is directly responsible for operational management while the Board Chair is the leader of the board, companies have the latitude to make their own decisions about how to divide the specific duties and authorities for each position.
There is no exact model for what constitutes board chair responsibilities. That is currently a work in progress and may be defined more specifically over time. Even while the job description continues to evolve for the board chair, it’s crucial that the CEO, board directors, employees and senior managers all understand the board chair’s duties and the CEO’s duties for the present.
Basic Chairman of the Board Responsibilities
The board chair schedules board meetings as often as needed. Boards of directors usually meet at least quarterly. The board chair’s duties and responsibilities require a specific set of skills.
Much of the board chair’s responsibilities center around getting groups of people to work together and to share information. Communication and collaboration skills top the list of qualities that all board chairs need to be effective in their positions. Active listening skills and the ability to facilitate a productive board meeting are also necessary skills.
The board chair serves a leadership position in the boardroom and with the CEO. While the board chair is a leader for the rest of the board, the person who fills this role is also a peer. The board chair manages board business and activities, but doesn’t manage the board itself. The board holds the highest level of decision-making authority for the company with the chairperson at their head. The board’s authority exceeds that of the CEO. At the same time, the board is not able to overrule the CEO’s authority or the board’s authority.
In facilitating board duties, the chair ensures that the board fulfills its duties, such as choosing and firing the CEO, approving major policies and making major decisions. The board is responsible for overseeing the CEO’s performance and ensuring that the company is profitable and can sustain itself for the long term. Another responsibility that the board chair has in relation to the board is to provide guidance and direction to them in their duties to gain a competitive edge and work toward gaining market share, as well as continually reviewing the company’s performance and planning for the future.
The Board’s Relationship With the CEO
While the board chair has significantly different responsibilities and authorities from the CEO, all things work best when the board chair and the CEO have a good working relationship and feed off each other’s strengths and weaknesses. After all, it takes both of them together to provide quality top-level leadership.
Under the best of circumstances, the board and the CEO will develop a trusting, ethical relationship. However, trust only develops over time, so it’s vital that the board chair and the CEO keep in regular communication with each other. In having a close business relationship, the board chair will greatly assist the CEO by being available as needed and giving the CEO appropriate resources from which to draw.
It is part of the board chair’s responsibility to ensure that the CEO is effective in that role. The CEO should feel that he or she can turn to the board chair for guidance and mentorship. At the same time, the board chair should be willing to receive informational feedback from the CEO about the board’s decisions. This relationship should be fairly reciprocal. The board chair and the CEO should be mutually supportive of each other’s goals.
The CEO is responsible for taking care of any legal problems related to operational issues. Under the direction of the board chair, the board needs to be careful not to micromanage the CEO. However, the board chair may assist the CEO in a more direct way during times of crisis. The board only gets involved in legal issues if the state’s attorney general conducts an investigation into the company.
Board Management Software Is the Board Chair’s Primary Resource for Modern Governance
Adjustments in the business world are difficult, and perhaps, they are even more challenging considering how many things are changing in the corporate world. Many companies will likely experience some growing pains as they split the CEO and board chair positions.
Technology has opened up opportunities for board chairs to be able to communicate more regularly with the board and the CEO. Diligent Corporation is an industry leader in secure board management software programs, which is the board chair’s most effective tool for fulfilling their responsibilities. The platform allows the board chair to be in constant communication over a highly secure network where collaboration can happen on a continual basis.
In addition, the board management tools that comprise Governance Cloud will greatly assist the board chair in setting up agendas, putting online board books and packets together, and communicating with fellow board members.
A board management software system is important for boards to invest in, whether the board chair role stands alone or is combined with the CEO position. It’s simply the best way to approach modern governance.