At the top, this creates discord and confusion. Furthermore, as research from INSEAD’s Corporate Governance Centre demonstrates, the two roles are vastly different—as are the abilities required for each. The board, not the corporation, is led by the chair, who is a facilitator of good group discussions rather than a team commander.
The majority of board chairs are seasoned executives
INSEAD reduced the criteria for the chair’s function down to eight principles by polling 200 board chairs and interviewing 140 chairs, directors, shareholders, and CEOs. (1) Act as a sidekick; show restraint and make room for others. (2) Work on teaming rather than team building. (3) Take charge of the preparation work; producing the board’s agenda and briefings is a large part of the job. (4) Take committees seriously; they are where the majority of the board’s work is done. (5) Maintain your objectivity. (6) Assess the board’s efficacy by looking at its inputs rather than its outcomes. (7) Don’t be the boss of the CEO. (8) Act as a representation to shareholders rather than a participant. While many executives will have to change their gears and attitudes in order to implement these, successful chairmen believe the work is well worth it.
Half of the S&P 500’s board members are also the CEOs of their firms, while the great majority of the others are past CEOs. However, the intimate relationship between the two roles causes issues. It’s difficult for a board of directors led by the CEO to act as a check on that CEO, which is why, following the corporate scandals of the 1990s and early 2000s, many corporations began separating the positions. However, when the chair is not the CEO, there’s a significant risk that he or she may start functioning as an alternate CEO, causing conflict and uncertainty among the company’s top executives.
So, what are excellent practices for the chair’s function, and how do they differ from CEOs’ and senior executives’ previous methods? INSEAD’s Corporate Governance Centre undertook a study project that comprised a survey of 200 board chairs from 31 countries, 80 interviews with chairs, and 60 interviews with board members, shareholders, and CEOs to find answers to those concerns. Despite certain contextual variations (primarily linked to ownership structure and, to a lesser extent, country culture), we discovered a surprising amount of consensus on what constitutes a good chair.
A successful chair, according to the participants in our survey, offers leadership to the board of directors, allowing it to operate as the organization’s top decision-making body. “The chair is responsible for and represents the board, whereas the CEO is responsible for and is the public face of the firm,” one poll respondent explained. Because of this key contrast, the chair’s role is extremely different from that of the CEO, and it necessitates special abilities and techniques. We’ve condensed the requirements into a set of eight principles, which we’ll describe in the pages ahead, along with examples of leaders who have put them into practice.
Be a side-by-side guide
More than 85% of the board chairmen we looked at had previously served as CEOs. They thrived on establishing a vision, taking risks, selecting people, issuing instructions, taking responsibility, and leading by example. These CEOs were used to being stars on stage and were action- and results-oriented.