A Chair, also known as a Chairperson or Chairman, is an executive elected by a company’s board of directors. The primary role of the Chair is to preside over board meetings, facilitate the strategic direction of the company, and work to build consensus among board members on various issues.
Responsibilities of a Chair
Presiding Over Meetings
The Chair is responsible for leading board meetings, ensuring they are conducted efficiently, and that all directors have the opportunity to speak and contribute.
Building Consensus
A key responsibility is to foster a collaborative environment where board members can reach a unified decision on critical matters.
Strategic Guidance
While not involved in day-to-day management, the Chair provides significant influence over strategic planning and may play a pivotal advisory role to the CEO.
Committee Oversight
Chairs often oversee major committees within the board, such as the audit and compensation committees, ensuring that these groups function effectively and in alignment with the board’s objectives.
Chair vs. CEO
Authority and Decision-Making
- Chair: Primarily responsible for governance and presiding over the board, with authority mainly related to board activities.
- CEO: Holds executive authority over the day-to-day operations of the company and is accountable for implementing board directives.
Responsibilities Outline
- Chair: Focuses on long-term strategic guidance, oversight of board functions, and ensuring compliance with governance practices.
- CEO: Operational leader focused on executing the company’s strategy, managing executive team performance, and achieving financial and operational targets.
Selection and Term
- Chair: Elected by the board of directors, often from among its members.
- CEO: Appointed by the board of directors based on experience, leadership skills, and strategic vision.
Special Considerations
Independence
The Chair should ideally be independent, particularly in companies with a combined Chair-CEO role, to ensure unbiased governance.
Co-Chair and Vice-Chair Roles
In some cases, companies may appoint Co-Chairs or Vice-Chairs to share responsibilities and bring diverse perspectives to board leadership.
Examples in Practice
Example 1: Tesla, Inc.
At Tesla, Elon Musk originally served as Chairman and CEO but stepped down as Chairman in 2018 as a result of a settlement with the SEC, emphasizing the importance of separating these roles.
Example 2: Apple Inc.
Apple exemplifies a traditional structure where the roles of Chair (currently held by Arthur D. Levinson) and CEO (Tim Cook) are distinctly separate, promoting a balance of power and governance.
Historical Context
The role of the Chair dates back to the early days of corporate governance when effective leadership and oversight were essential for managing publicly traded companies and large enterprises’ complex dynamics.
Applicability
The role of a Chair is crucial in ensuring solid corporate governance, guiding long-term strategy, and maintaining a balance of power within the corporate structure. This role is applicable across various types of organizations, including non-profits, governmental bodies, and private enterprises.
Comparison with Related Terms
Director
- Director: A member of the board responsible for oversight and high-level strategic decisions.
- Chair: The leader of the board, coordinating directors’ activities and ensuring effective governance.
President
- President: Often the same as the CEO in some organizations, responsible for overall management.
- Chair: Focuses more on board responsibilities rather than day-to-day operations.
FAQs
Can the Chair and CEO be the same person?
How is a Chair selected?
What skills are needed to be a good Chair?
References
- “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker
- “Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out” by Ram Charan, Dennis Carey, and Michael Useem
- Tesla and SEC Settlement details available at sec.gov
Summary
The role of a Chair is integral to the effective governance and strategic oversight of a company. With distinct responsibilities separate from those of a CEO, the Chair ensures that board meetings are productive, decisions are made collaboratively, and the long-term vision of the company is clearly guided and supported. Understanding this role’s unique duties and distinctions is critical for anyone involved in corporate governance.
