The roles of chairman and non-executive director in a company continue to be widely debated. Here are some personal reflections from a man with 30 years experience of serving on, or presiding over company boards around the world.
Being chairman is an increasingly demanding challenge. You don’t just have to be in the US to understand that if things go wrong you are ultimately No.1 in the firing line. In the UK, which I know best, the travails at Marconi, Mayflower, Shell, BP and more recently the banks, vividly highlight the responsibilities involved.
So how best to equip yourself for the task? In my view, a solid apprenticeship as a non-executive director is almost always a prerequisite in the transition from divisional boss or CEO to the chair of a quoted company. The transformation from executive to non-executive does not always go smoothly because a different style and approach are necessary to be a good non-exec, and this has to be worked at. The effective non-executive is above all able to exert influence in the boardroom, has an ability to put his or her finger on key issues, focuses clearly on shareholder value, commands the attention of all the other directors when he or she speaks, reads the paperwork in advance and avoids superfluous questions. Nothing upsets me more than a non-exec who comes unprepared.
At the same time, non-execs must strike a balance between asking probing questions and supporting the executive team, all the time playing a full role on audit, election and remuneration committees (in themselves a great development ground and when well chaired, serving to free up board time that can be focused on shareholder value and future strategy). Effective non-executives constantly seek to increase their knowledge of the company and avoid “lecturing” others in an arrogant way.
Another way to learn the art of chairmanship, of course, is to observe other people doing the job well. Not all my chairmen have been flawless (far from it) but I’ve been fortunate enough as a non-executive director to have worked under some outstanding individuals. I’d single out the late Lord (Bob) Haslam, chairman of British Coal (where I was on the board for some seven years) and previously deputy chairman at ICI. He was a great influencer – yet with a low profile – and a gentleman, but someone who, when required, could be very tough. Sir David Lees, chairman of GKN (where I spent 10 years) and now chairman of Tate & Lyle, was superb on governance and administration. He focused hard on performance goals and was an unemotional devotee of portfolio management. I still tell him he ran a great academy for the development of non-executive directors.
Sir Richard (Dick) Giordano, who chaired the board of British Gas during my three years there, was a dominant personality who nevertheless appreciated strong non-executive directors: he used them to help force through the break-up of the company.
Let us now turn to what the chairman actually does and does not do. I’d start by saying categorically that the chairman’s role is to run the board (the CEO runs the company); to be a sounding board for the CEO (an adviser, counsellor); to be available to shareholders (though on the understanding that the CEO leads in this respect with the finance director); to take on ambassadorial roles in close association with the CEO; and to agree with the CEO and non-execs the overall board and management philosophy and strategy for the company. The chairman, crucially, does not issue executive commands down the line and keeps his or her hands off the operational levers.