On the week that Criticaleye announced the appointment of David Cheyne as our new Chairman, we decided to look at the considerable influence the chairman holds in today's environment.
There are many facets of the chairman's role that remain the same in any economic climate, Helen Alexander CBE, President, CBI explains: "The chairman has a huge responsibility to create a culture and behaviour in the boardroom, and in the company for that matter, which is characterised by respect, honesty and openness so that different views can be taken into account and difficult decisions taken."
However, the global financial crisis has changed the way chairman and boards operate. With executives focused inwardly on the day-to-day running of the business, it falls on the chairman to look outwardly.
Terry Stannard, Chairman, Walker Greenbank plc says: "I believe that there are two important roles for a chairperson in today's climate. Firstly, to provide an external context for the executive team who may be, more than likely, focused on internal operational activities in difficult markets. Secondly, to ensure sufficient board time is spent on strategy despite the pressing issues of short term performance."
Risk-management is another key consideration. "There is still uncertainty, both economic and political, so a strong focus on scenario analysis and risk assessment needs to be a board priority," says Paul Drechsler, Chairman & Chief Executive, Wates Group. "Trust and confidence in business and business leadership is at an all time low. This is another good reason to review company values, compliance and reputation."
Although, boards are reviewing their company's values and compliance Professor Peter Waine, Partner, Hanson Green fears that once in recovery these changes will be easily forgotten. He says: " In the aftermath of the recession, we are certainly seeing less focus on short-term gain and more on long-term growth. My hope is that this will continue and lessons will be learned but I fear that human nature will prevail and boards will revert back to satisfying shareholder demand for quick profit at the expense of long-term stability. Chairmen have a key role to play in ensuring that executives and NEDs don't fall into bad practices again."
It now falls on the chairman to see their companies through the recovery and beyond. "Having dealt with repairing balance sheets through refinancing capital raising and making sure that the shareholders interests are best protected, chairman are now needing to look at M&A proposals from the same perspective to make sure that the shareholder and executive interests are reconciled. As the recovery takes place at different speeds in different countries, (Martin Sorrels LUV shaped recovery), chairmen will need to ensure that the company strategy and its planned implementation remains valid in a changed world," said John Allkins, Non-executive Director, Intec.
One thing that hasn't changed is the chairman's role of creating the culture and team that ensures a smooth running board. Tim Wates, Chairman, Wates Family Holdings says: "In tough times, it is more important than ever that the chairman works hard to create the most winning environment possible for his CEO and key executives."
Sir John Egan, Chairman, Severn Trent and Associate, Criticaleye expands: "It is the job of the Board to create the culture of the company with respect to performance, risk and integrity . This is done deliberately or by default. The default option carries with it grave risks."
Equally it is the chairman's job to ensure the right mix and remuneration on the board. Michael Jackson, Executive Chairman, Elderstreet Investments Ltd says: "It is up to the chairman to make sure the company has the right CEO and that executives are rewarded appropriately."
Relationships among the board are vital. “It is important that the chairman, chief executive and finance director work as a united team and the chairman takes soundings from his independent non-executive directors," John Brackenbury CBE, Chairman, Avanti Communications Group plc.
Equally it is the chairman's job to ensure the right mix and remuneration on the board. Michael Jackson, Executive Chairman, Elderstreet Investments Ltd says: "It is up to the chairman to make sure the company has the right CEO and that executives are rewarded appropriately."
Relationships among the board are vital. “It is important that the chairman, chief executive and finance director work as a united team and the chairman takes soundings from his independent non-executive directors," John Brackenbury CBE, Chairman, Avanti Communications Group plc.
It is also important for chairman to remember that they answer to the shareholders and stakeholders. "The job of the chairman is to keep the company focused on the interests of its owners, the shareholders, rather than its managers by providing challenge without domination and support without complacency," Sir Michael Lyons, Chairman, BBC Trust.
"In the long run delivering for customers in a way that meets the needs of society is a fundamental requirement. The chairman and the board need to understand the impact of a business on society and the environment more than ever as we tackle the challenges of loss of trust in business and most of all climate change. Alongside all of this companies need to focus on employee confidence, pride and engagement and to recognise success publicly and loudly," says Paul Drechsler.
"In the long run delivering for customers in a way that meets the needs of society is a fundamental requirement. The chairman and the board need to understand the impact of a business on society and the environment more than ever as we tackle the challenges of loss of trust in business and most of all climate change. Alongside all of this companies need to focus on employee confidence, pride and engagement and to recognise success publicly and loudly," says Paul Drechsler.
Professor Sir Andrew Likierman, Dean, London Business School succinctly concluded: "One can try to define the role of a good chairman as a set of characteristics, but it is far more than that. It is also those intangible elements such as getting the best out of the members, setting the right tone and making sure that the board is credible internally and externally."
If you are interested in topics that were contained in today's newsletter, you may find the following pieces of Insight interesting: Rethinking the basics of corporate governance, an article by Criticaleye Associate Bob Garratt offering his thoughts on today's executive-dominated boardroom. Also see, How to be an Effective Board Member, a film of one of Criticaleye's breakfast forums, featuring Lady Barbara Judge, Bernard Cragg and Peter Waine. We also have an upcoming evening event for non-executive directors on 1 December featuring a keynote speech by Sir Andrew Foster.
I look forward to seeing you soon.
Matthew
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