Every company has a board chair who is the leader of the board. Generally, it works best when the board chair is not also chair of a committee. The board chair is in the background when it comes to committee meetings. This gives other directors on the board the opportunity to have a deep level of involvement. It also helps committees to maintain independence and objectivity from the board chair.
When the board chair is on a committee as a member, it is important that the chair behaves differently than when he/she is leading a board meeting. In this situation, the board chair plays the role of a committee member, not the boss or leader of that committee. The board chair mostly listens.
The board is a body of very senior people who work collaboratively. The chair’s role is to maximize this collaboration and drive successful results. The board chair is not the board’s boss. All directors are equal. Think of the chair as someone who drives closure to decisions and process.
The board chair is not the CEO’s or the management team’s boss. The senior management team is under, and overseen by, the CEO.
Another reason why the board chair should not be a committee chair is because the board chair position is a busy position with board communication and coordination. The role of board chair has three elements: 1) communication, 2) coordination, and 3) governance.
Communication between management and board includes:
Ensuring the board and management communication is smooth
Ensuring communication between the board members is smooth
Providing timely feedback in all directions and achieving desired results
There are numerous places where communication could go wrong. For example, there are board directors who overwhelm the management team by providing management with side feedback, assigning off-hand tasks, or going into an operating mode. So, part of the board chair’s responsibility is to gently guide the director back to oversight.
In terms of communication for the entire board, you are trying to avoid pockets of communication that exclude certain board members. This can cause discontentment.
As for feedback, you are providing feedback to the CEO in a timely manner and avoiding a situation where different board members are providing conflicting feedback. As a matter of practice, gather all the feedback from the entire board, distill it into messages without necessarily saying, “Paul said this.” Instead, consolidate feedback for the CEO while making sure to avoid any conflicting messages.
If there is a board member who is not contributing, or it’s time for that board member to go, the board chair delivers the message. The chair gathers the feedback from the rest of the board and provides it to the individual board member. Communication is important and may eventually take the form of asking that board member to leave or asking them not to stand for re-election.
One potential problem in communication when there’s an active board chair is that there is frequent communication between the CEO and the chair, but not enough communication with the rest of the board. This leaves the rest of the board feeling left out. Sometimes, the CEO assumes that the board chair is communicating with the board, or the board chair assumes the opposite.
Remember that the whole board is the CEO’s boss, not the board chair alone. A key part of communication for the board chair is to make sure communication between the CEO and the chair does not substitute for communication between the CEO and the full board. For example, when the quarterly results don’t meet expectations, the CEO informs board chair. Together, you decide which one of you is going to tell the rest of the board about the quarter’s challenges. As a board chair, you are a conduit.
Communication with investors
It is becoming more common and expected for investors get access to board members, particularly the board chair and compensation committee head. As an example, when a company has a significant say-on-pay issue, the compensation committee chair and the board chair can expect to spend time during proxy season with major investors to help them understand the facts. They also work with the proxy advisors.
Board communication with investors needs to be carefully constructed and managed. Directors talking to investors need to be consistent on what they say, how they say it, and not to get into areas out of their scope.
For say-on-pay issues, or governance issues, clearly the board chair and, in general, the board gets more involved. But stay away from product investment strategy; it’s best to leave that to the management team. When you engage with investors, be sure to include the CEO, otherwise, you could send the wrong message of distrust for management. The CEO is the investors’ communication channel for these questions.
Communication with customers and employees
Leave communicating with customers to the sales team, the CEO, or the product team who know the relationship better. There may be extraordinary events that require board communication. For example, when a major shutdown occurred and a key customer requested a meeting, the CEO and board chair presented a coordinated message that said the company would put in place all the resources required to fix this problem.
In terms of communication to employees, leave that to the HR team and to the CEO. There are, however, events when a message from the board chair makes sense. As an example, when the company has an acquisition, the CEO requested the board chair visit the new company and deliver a message to new employees. Again, it’s event-driven, and not on an ongoing basis.
There may be semi-formal mentorship programs between board members and those who are two or three levels below the CEO. These are up-and-coming key business leaders whom you mentor and give exposure. You may have breakfast or lunch with them to hear their vision. This is good career development for the executives, and it gives the board good exposure to the management team so they can gather key data points around the organization as well.
The board chair spends a tremendous amount of time coordinating across management and the board in three key areas to:
Create an efficient platform for board tasks and committee work,
Drive creation of company strategy, and
Ensure each board meeting serves its purpose
Creating an efficient platform includes setting the meeting agendas together with the rest of the board and agreeing on the purpose of each board meeting. The board chair is a coordinator to put together a cohesive process with management.
For example, once a year, there is a strategic meeting and from there you derive the preliminary annual operating plan for the following board meeting which is three months later. Then, a few months later, you approve the full annual operating plan which ties all of the previous elements together.
One of the most important tasks for the board chair is guiding the management team to develop a strategy. The role of the board is decisive in what the company strategy includes and perhaps more importantly, all the things the company should not do. The company may not have the skill set, cannot afford the R&D, or cannot afford the go-to-market strategy.
- The board chair ensures that the board meeting is efficient and that it serves its main purpose. There may be situations where “strategic thinkers” on the board want to go back to rethink and re-analyze the strategy while discussing an annual operating plan. The board chair’s job is to bring the meeting back to the task at hand.
The entire board shares the job of governance by working with the general counsel and the outside counsel. The board chair sets the tone of integrity for the entire board, company, CEO, and the management team.
The board chair reviews the metrics together with the board. They remind the board of the key milestones coming up and of the work distributed to the committees.
- If an activist shareholder approaches the company, the board has a decision to make. Do we fight? Do we give them one board seat? What do we give? The board chair does not decide unilaterally but drives the communication and closure.