Magazine article Management Today

How to Be Chairman

Magazine article Management Today

How to Be Chairman

Article excerpt

With the former chairmen of some of the UK's major institutions in disgrace, the role of the top job in public enterprises is under scrutiny like never before. Far from being benign or restraining, their influence brought catastrophe for both their business and the economy So what is a chairman for? Boardroom veteran ROGER PARRY explains how this subtle duty should be carried out.

There is no simple formula for doing the job of non-executive chairman. Success or failure is more complex than growing the share price or profits. Mitigating a disaster can be as big a result as a victory. What follows is one perspective on what is needed. (The term chairman, by the way, is taken throughout to mean a man or woman.)

For most people, the main challenge of being appointed to chair a public company is that they have not done it before. One day you are a CEO or a director on one board, then suddenly you are chairman elsewhere. There is no set of rules to follow, no manual, no training course.

There is more to the role than the mechanics of board meetings. At its core is managing the relationship with the chief executive. He or she is the boss, yet you have the power to fire them. It's a potentially difficult double act. I was lucky that when I was CEO of a plc I had an experienced chairman. His sage words to me on our first day were: 'I will back you in every way until the time comes that I feel I have to sack you.' Fortunately, it never came to that.

There are three crucial tensions for a chairman to manage: independence vs advocacy; leadership vs control; and strategy vs tactics.

The notion that the chairman is independent of the company is an illusion. Non-executive directors should demonstrate tough-minded independence, but the chairman is, in reality, aligned with the management team. The chairman has to represent the company with pride and fight for its reputation. This requires commitment, conviction and passion, which does not sit well with ethereal detachment. But the chairman represents the shareholders too, and should have regular contact with them.

Some issues may divide owners and management interests. On behalf of the shareholders, the chairman should question complex financing schemes that boost earnings and bonuses but increase risk. And he should challenge charity or political donations that enhance management status but do not create value. The chairman should exercise independent judgment, but cannot be dispassionate.

The chairman is not the CEO. He must accept that the role is to support and coach the CEO, not try to supplant him or her. You cannot have two people in charge.

Chairing the board effectively requires leadership through influence rather than command and control. It means getting good information prepared, ensuring all key points are raised and all voices are heard. Leadership is not to dictate answers but to make the team functional. The power to issue orders and hire and fire staff rests with the executives. The chairman can persuade and cajole, but not direct.

If the chairman has an (obviously brilliant) commercial idea, the best way to raise it is with the CEO in private. If the CEO is enthused, he can then take it to the board as an executive proposal. The worst place to come up with new ideas is in the middle of a board meeting. Regular, informal meetings between chairman and CEO will help smooth the process.

There should be no conflict between strategy and tactics, but often there is. The need to achieve growth in quarterly earnings can be at odds with the desire to invest in a market, skills or a technology. …

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