We will start with three clarification points. Firstly, we are using the term Chairman because that is what most organisations in the UK use, regardless of whether their Chairman is a man or a woman, so no gender bias is intended.
Secondly, at least for the purposes of this article, it goes without saying that a good Non-Executive Chairman should be a good Non-Executive Director too – so over and above the points listed below, Boards should critically examine a Chairman’s credentials to add value to their company as a NED.
Thirdly, it would be impossible to draw up a complete list of all the qualities a good Chairman needs in all circumstances, so this does not attempt to be an exhaustive checklist. Instead it focuses on the essence of the Chairman’s role which is to lead the Board (as opposed to the CEO’s role which is leading the company). In practice this means finding a Chairman who can:
- Set the Board’s agenda. A good chairman knows what topics Boards need to discuss - Strategy, Governance, Risk, Performance, People, etc - and can balance the time spent on ‘supervision’ versus that spent on ‘direction setting’. Too much of the former and a Board becomes too backwards-looking and negative. Too much of the latter and it risks being another Enron, winning plaudits for its innovative strategy without noticing that the company is sliding into bankruptcy.
- Encourage constructive debate in the Boardroom. The best Boards have an atmosphere of sharing, openness and respectful questioning, where directors pro-actively seek the advice of their colleagues. And good Chairmen know how to conjure up that atmosphere.
- Embody high standards of probity, and set clear expectations concerning the organisation’s culture, values and behaviours. If the Board doesn’t appear to be unduly worried by mis-selling, why should the sales team be?
- Insist that all Board members receive accurate, timely and clear information without causing disproportionate disruption to the Executive team’s day jobs.
- Conduct Board meetings efficiently, involving all directors and making sure all of them do more listening than talking. A good chairman also knows how to ensure discussions don’t get side-tracked, and that tough decisions are taken rather than shied away from.
- Demand that all the Non-Executive Directors commit enough time to their role and know the organisation sufficiently to contribute to Board discussions. And the first rule for making sure your company’s NEDs are not over-stretched is to avoid recruiting an over-stretched Chairmen.
- Ensure effective communication between the Board and the organisation’s shareholders (or in a membership organisations, its members), its employees and other key stakeholders such as its regulators.
- Structure the Board correctly, knowing how to make best use of formal and informal Board Sub-Committees. Sub-Committees can make a huge difference to a Board’s effectiveness (particularly if it is a large one) and it’s part of the Chairman’s role to set them up and agree their composition and terms of reference.
- Shape the Board’s composition, development and succession planning. How many Execs and Non-Execs should be on the board? How should external directors be recruited? And how should new Board members be inducted and what ongoing training should they receive? A good chairman should not take these decisions alone but should lead the discussion to ensure the Board is fit for purpose.
- Produce minutes and notes that are concise, fair, accurate and action-oriented.
- Encourage regular evaluation of the Board’s performance. Successful chairmen welcome genuine board assessments and enable other Board members to appraise their own performance as Chairman without fear or favour.
- Keep the Board as functional as possible in a crisis – maintaining the balance between swift decision-making and thorough discussion.
- Build a strong and productive working relationship with the CEO whilst retaining enough detachment to objectively assess whether the CEO is still the right person for the job.
And if all the above sounds like a job for superman or wonder woman, consider one more thing. All good Chairmen are under appreciated at the time and their true skills are only realised when they’ve gone.
William Micklethwait.
London Practice Director, First Flight Non-Executive Directors Ltd.
