The Non-Executive Chairman Comes of Age
By Keith Kefgen, May 11, 2004
The role of the non-executive chairman is often misconstrued. It is vital for companies to delineate the responsibilities of the chairman so as to avoid confusion and promote healthy governance.
Separating the role of board leadership from management has been an ongoing debate. Quite possibly, the notion of this separation stems from the power abuse witnessed by a number of corporate leaders of major public companies. Take, for example, Worldcom’s former CEO and chairman, Bernard Ebbers, who was charged for fraud and conspiracy related to the collapse of the company. It could be argued that if for no other reason, the role of CEO and the non-executive chairman should be separate in order to place a constructive check and balance against excessive concentration of power. But before one can even consider the implications of separating these positions, a better understanding of what
these job functions consist of must take place – namely, the rarely talked about and often misconstrued role of the non-executive chairman requires a closer examination.
With already so many issues and complexities within public companies today, executives would be remiss to not have a clearly defined set of responsibilities for their chairman. A company’s articles should openly convey, with certainty, the following duties for their non-executive chairman:
- After consulting with CEO and other board members, create board agenda for the year and for all meetings
- Chair meetings of the board and verify/disseminate minutes
- Ensure each committee is effectively staffed and operating
- Oversee information distribution to board members, ensuring adequate and timely reports
- Coordinate necessary board member visits to company facilities
- Review the success of the Company’s ethics program, internal audit and legal compliance systems
- Review and evaluate the contribution and effectiveness of each director
- Review the performance of the CEO and make recommendations to the board regarding succession planning
- Carry out any additional duties as reasonably requested by the board and/or the CEO.
In addition to these outlined duties, the non-executive chairman should expect to work 10-15 hours per week in fulfilling his/her tasks. Also, the chairman should qualify as an outsider (no previous ties to the company) and not sit on more than one other board while serving as chairman. Finally, the company should compensate the chairman above standard director pay - chairman compensation can be reviewed annually by outside experts in conjunction with the compensation committee duties.
Once the duties are outlined and terms established, performance measures must be instated – a chairman evaluation process should be conducted by the full board each year and a term limit should be set for a maximum of eight years. These stipulations decrease the likelihood of complacency and “cow-towing” to a strong CEO. It is critical to determine the effectiveness of the non-executive chairman since ultimately, the role of leading the board in its activities is essential to establishing healthy governance.