In previous Overtures, we have explored the high bar that has been set to be an effective chairman. This is a topic that is central to our Board Search and Board Development practices, and with unrelenting change underway in the political, macro-economic and governance landscape, the role of chairman has undoubtedly become multifaceted and substantially more demanding in recent years. Arguably the calibre of the chairman is one key determinant of a company’s ability to navigate change successfully. As such we are delighted that in the first edition of Overture in 2015, Jeremy Small, a highly experienced company secretary with a leading UK company, expands upon the attributes today’s chairman requires in order to face and embrace the future.
Gillian Karran-Cumberlege
Chairman as Artist
Chairing a board meeting successfully is an art that requires careful preparation, willingness to act on feedback and, above all, practice. The role of chairman is increasingly important, with a growing profile and much greater awareness than was previously the case, particularly for listed companies. The UK Corporate Governance Code states that ‘the chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role’. Similarly, the Deutscher Corporate Governance Kodex makes it clear that ‘the chairman of the Supervisory Board coordinates the work of the Supervisory Board’.
The biggest challenge that any chairman, and indeed any board, needs to address is how to make decisions effectively. Often, boards seem to be content to allow a consensus to emerge. They defer to a technical specialist, or follow the views of the most outspoken person in the meeting (especially if it is the chairman or a particularly strong-willed chief executive).
It’s no easy task being chairman: UK guidance about the role lists fifteen aspects, from ethical leadership to effective communication.
– Andrew Hill, writing in the Financial Times,
12th December 2011
It is vital to decide in advance how to make the best decision possible. The role of the chairman is to lead and facilitate this process, beginning with careful consideration of the agenda and the appropriate level of pre-syndication and conversation necessary to ensure a properly informed debate in the board meeting itself. The chairman should also ensure that the nature of the decision required is completely clear to everyone concerned, as well as its intended effect on the business.
Chairman as Maestro
The chairman’s role is very similar to that of an orchestral conductor. He or she sets out a vision, leads the process to achieve it by facilitating and encouraging participation and artfully blends these elements to result in the desired outcome. In practice, this typically means guiding and managing individual contributions by prompting a real openness, to ensure effective debate.
The chairman must draw out opinions and views from quieter directors. He or she should be alert to the fact that it may be necessary to delay a decision until the entire board has been able to absorb specific ideas or proposals, or to await the outcome of further analysis.
In certain circumstances it may be useful to appoint a devil’s advocate to provide sound counterarguments. This would ‘pressure test’ a proposal made to the board, from a factual rather than emotional point of view. Such a test can be remarkably successful and, ultimately, lead to a far better decision than would otherwise have been the case. This approach will also help the chairman to manage the meeting and remain in control of the process by encouraging debate and challenge.
Chairman as Peacekeeper & Bridge-builder
A key aspect of the chairman’s role is to ensure that no one will be punished for expressing dissent: Firstly during the meeting itself when group dynamics can lead the board or a sub-set to round on an individual who expresses reservations or opposes a proposal. Secondly the period after a meeting during which a dissenting board member may become increasingly marginalised, or even encouraged to consider leaving the board. This must be avoided at all costs as it will have profound effects on the entire organisation by showing that there is a personal cost to dissent.
The chairman should also ensure, as the UK Corporate Governance Code notes, that there are ‘constructive relations between executive and non-executive directors’. While this refers to a unitary board, I believe the principle is the same for a supervisory board as any decision-making body comprised of two types of directors needs to operate effectively as a unit.
At times the chairman will need to work hard to build and maintain a suitably challenging, collegiate approach – one of the reasons why the role is so difficult to perform well.
Chairman as Switchboard
It is also worth considering the chairman’s role outside of board meetings. This can easily be underestimated in terms of its contribution to the effective running of a board and crafting a cohesive group of independently-minded people to lead the company.
Communication is vital and can range from short telephone updates to more structured progress reports on specific matters and in camera discussions amongst the non-executive directors. This provides frequent opportunities for concerns and issues to be aired, and can be remarkably effective. When matters are left unexpressed they often remain unresolved, potentially reducing the board’s effectiveness and perhaps leading to disruptive resignations and dismissals.
Board evaluations can serve to prevent such a situation arising, and they can lead to an almost confessional approach. Assessors can act as a conduit, allowing the raising of those major issues with/between individual board members which need to be dealt with. Such issues can potentially persist for a considerable time without resolution, reducing the board’s effectiveness.
This all requires a chairman to be attuned to the group dynamics and behaviour of board members. He or she must rely on sound support from individuals who can help to identify issues and raise concerns objectively: those who recognise the need to play an active role that engages all board members both during and outside meetings.
Chairman as Pupil
None of this is easy, as every board is different and evolves over time as its membership changes. Few new chairmen are trained for the roles they take on. They may have very seldom experienced good chairmanship during their previous executive roles. However, an awareness of the challenges and a willingness to seek and use support will greatly improve his or her chances of leading an effective board.
No doubt much of what is written so far will be familiar to many readers. However, the board environment is changing rapidly with growing expectations relating to diversity and how best to keep boards refreshed. This development brings one to:
Chairman as Diversity Champion
Too often diversity is simply portrayed as a matter of gender balance, when it is more to do with relevant and complementary skill sets. An essential and growing part of the chairman’s role is to ensure that the board evolves at the right pace to meet the changing demands placed on the business and the markets in which it operates.
Current challenges typically relate to increased competition (often from adjacent sectors and different geographies), multi-generational customer segments, the digitisation of activity and rapidly growing value of data.
The chairman, therefore, needs to consider how best to update the board’s collective skills, constantly balancing the need to refresh the board with retention of critical knowledge about the business and its operations. Certain sectors may also need to reflect on the best way to accommodate increasingly intrusive regulation, while others may have to decide how best to take advantage of technological innovations, for example 3D printing.
Chairman as Captain
It is essential that the chairman remains focused on leading the board as a team. A key element is deciding which people are to be replaced and planning for those changes. This includes the most sensitive issue of all: when the chairman is to be succeeded, and a new leader appointed to take the board and the business on the next stage of their development.
Musicians don’t retire; they stop when there’s no more music in them.
– Louis Armstrong
None of this is easy and is relatively uncharted territory for most chairmen and boards. It requires a considerable degree of confidence to effect the changes needed, and has to be coupled with the humility to recognise that no-one can, or indeed should, remain at the top of an organisation when these multifaceted demands have become overwhelming.
Jeremy Small, author of this edition of Overture, is the Group Company Secretary of AXA UK, a multinational financial services firm.
Fidelio High Notes – January 2015
- Fidelio currently conducting Non-Executive and senior Executive Search across a range of sectors; a focus on Finance and Communications expertise
- Fidelio supporting corporate and consultancies to identify the skill sets and experience required to navigate changes in the capital markets
- Fidelio IR practice published The Key Developments for the IR Profession in 2015. For further information please email szhang@fideliopartners.com
- Fidelio hosts Board breakfast with the Chair of Ofqual on Leadership and Education
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