The words ‘power, authority, and leadership’ are often used to describe the chairman of the board of directors. They are the most powerful member of the board, the ones at the zenith of the board’s authority table, and the figure the board members and top executives often turn to for guidance.
The board chair liaises between the board of directors and the company’s top executives, especially the CEO and managing director. This highly ranked figure sets board meeting agendas, convenes and chairs the meetings, oversees the induction of new board members, appoints the CEO, and performs many other duties for the company and board.
Sometimes, the company CEO plays the role of the board chair, especially if the company is small. In other situations, the board chair may be forced to temporarily step into the CEO’s shoes on an interim basis until a new CEO is appointed. Nonetheless, most companies separate the two positions to avoid conflicts of interest.
In the corporate hierarchy, the board chair heads the entire team of directors, which may sometimes include the CEO. However, the board chair is appointed by the directors.
This guide will help you better understand the role of the board chair, their qualities and compensation, and everything about their job. Let’s dive in!
Key Takeaway
- The board’s chairman heads the board of directors, providing general oversight and facilitating good corporate governance.
- The names ‘board chairman’ and ‘board chairperson’ are the same, but the latter is more gender-neutral than the former.
- Some notable responsibilities of the board chair include board leadership, corporate governance, company ambassadorship, CEO appointments and performance evaluation, strategic planning, top management engagement, and director induction.
- The board chair is nominated and appointed by the members of the board of directors. The board can also fire the board chair from their position.
- The board chair should embody qualities such as effective communication, strong leadership, commanding presence, integrity, excellent listening skills, strategic thinking, independent thinking, and an understanding of corporate governance.
- The board chair outranks the CEO and receives better compensation. However, the two must work cohesively for the company to succeed.
- The CEO can also chair the board of directors and vice versa (in an interim capacity).
- Though the board directors appoint the board chair, the chair heads the entire board and outranks individual directors.
- Common challenges affecting the board chair include balancing board members’ viewpoints, conflicts of interest, corporate governance, succession planning, and micromanagement.
What’s the Chairman of the Board?
The chairman of the board of directors (BOD), sometimes known as just the board chair, is the person who heads the board of directors. They convene and preside over board meetings, liaise between the board and the top executives, and facilitate corporate governance, among other duties.
Essentially, the board chairman is the top-ranked authority figure of a given board of directors. Their powers and jurisdictions are clearly outlined in the company’s bylaws, which they should observe. Failure to do so or intentional violation could warrant their removal from office.
What’s the Difference Between the Chairman and the Chairperson of the Board?
The terms “board chairman’ and ‘board chairperson’ are often used interchangeably, but they aren’t different. However, most people prefer ‘chairman’ when the board chair is male and ‘chairperson’ when it’s either gender.
What’s the Role and Responsibility of the Board of Directors?
The Role of the BOD Chair
The role of the board chair is to facilitate effective board leadership and performance. They ensure the board fulfills its mandate of ensuring good corporate governance, where the board demonstrates essential pillars like accountability, integrity, transparency, responsibility, and fairness when dealing with stakeholders.
The Responsibilities of the BOD Chair
In addition to fulfilling their roles as shared above, the board chair is also responsible for the following duties:
- Board leadership – The board chair heads the board of directors. They provide leadership and guidance to the board, chair the board meetings, and delegate responsibilities to the various board members when necessary.
- Corporate governance – The board chair is the primary custodian of corporate governance in a company setting. They ensure the board demonstrates accountability, transparency, and fairness in its dealings while observing proper risk management practices and responsibility.
- Company ambassadorship – When needed, especially when explaining a vital decision to stakeholders, the board chair steps up. They can also face the media to address public concerns about the company and protect its image on behalf of the CEO.
- CEO appointments and performance evaluation – The board chair appoints the CEO, who can be a staff member or an outsider. Not only that, but the board chair also evaluates the CEO’s performance and can fire the executive if they fail in their corporate mandate.
- Strategic planning – The board chair is pivotal in shaping the company’s strategic direction. They ensure the board works to help the top executives and other management levelsdrive the company to its strategic plans.
- Top management engagement – The board chair bridges the gap between the BOD and the top management. They ensure smooth communication between the board of directors and the CEO or company president.
- Directors’ induction – The chair heads the rest of the board of directors in inducting new members to the BOD. They ensure the new nominees understand what’s required of them to effect their mandate on the board.
- Advises chief executives – The board chair advises the CEO, managing director, or both on strategic planning and business operations.
- Stakeholders’ engagement –The board chair engages shareholders and other stakeholders on company matters to help understand their concerns and relay them to the board for deliberation.
- Subcommittee appointments – The board chair appoints small committees to handle issues like company audits, governance matters, committee compensation, and many others that may arise and need small-group handling.
- AGM chairing – The board chair doesn’t just chair the board of directors’ meetings. They also head the annual general meeting. Alongside the other directors, the board chair makes themselves available to address any concerns arising during the AGM.
Who Appoints the Chair of the Board?
Ordinarily, the board chair is selected by a majority vote of the board of directors. The board members vote to decide who should lead them. Most companies opt to appoint a board chair from independent or outside directors—those who aren’t part of the staff or aren’t closely tied in a way that could prompt a conflict of interest.
For example, they may resolve against appointing the CEO as board chair for the mentioned reasons.
Other companies prefer an open vote system where the board members can nominate each other for the chair position. The person who receives the highest nominations gets to be the chair. Alternatively, they can decide to vote, and whoever gets the majority vote becomes the outright winner and board chair-elect.
While there’s no specific timeline for serving as a board chair, most chairs serve for 5-8 years before vacating the seat. That’s if the board doesn’t find them incompetent early in their tenure. If they do, the board can relieve them of their duties and vote for a new board chair.
What are the Qualifications and Qualities of the Chairperson of the Board?
The Qualifications
Generally, most companies require the board chair to possess at least ten years of top-level management experience in a relevant field. They must demonstrate strong leadership. One way to show this is by having adequate experience.
In some cases, the company CEO is elevated to the board chair position and thus becomes the most powerful executive and decision-making body. Other companies choose the board members with the majority stakes to head the board. This is, however, rare.
Proper education qualification is another consideration. In most cases, you’ll need at least a degree, preferably in a business-related field such as business administration, to be a board chair. A master’s degree, however, places you in a more advantageous position.
The Qualities
Board chairpersons should demonstrate several qualities, which include the following:
- Effective communication – The board chair should be a good communicator. They should be able to speak clearly, especially during board meetings and when representing the company during interviews and public addresses.
- Strong leadership – The board chair should inspire the board members and drive them and the company toward its objectives and vision.
- Commanding presence – As the voice of the board of directors, the board chair should demonstrate an influential presence when making decisions. They should also command feedback and accountability from the top executive, especially the CEO – albeit professionally.
- Integrity – One of the critical pillars of good corporate governance is transparency, which requires utmost integrity. The board chair should demonstrate that.
- Great listening – It’s about being a good speaker and an excellent listener. Effective communication is two-way for board chairs.
- Strategic thinking – The board chair should be able to anticipate future corporate trends and plan for the company’s long-term success.
- Independent thinking – The board chair should make nonpartisan decisions. They should base their decisions on what’s in the company’s best interestand not what favors them. Their contribution shouldn’t show any biases.
- Understanding of corporate governance – Since the board chair ensures good corporate governance, they should be familiar with all its responsibilities, especially demonstrating transparency, accountability, fairness, and risk management.
Chairman of the Board Vs CEO
Sometimes, a company’s CEO may be promoted to head the board of directors. In such a case, they become the highest-ranked executive (referencing the CEO docket) and the most influential board members (referencing the board chair’s docket). Note, however, that the two positions are different.
On one hand, the board chair heads the board of directors and chairs its board meetings. The responsibilities in this case include providing leadership for the board and oversight to the top management (which includes the CEO). Moreover, the board chair performs duties like strategy planning, CEO appointments and evaluation, and corporate governance facilitation.
On the other hand, the CEO is the top executive who oversees the company’s day-to-day operations and its strategic execution. While the board chair focuses on corporate governance, board guidance, and strategic oversight, the CEO concentrates on practical management aspects of the company.
Some notable duties of the CEO include to:
- Define the company’s vision and mission
- Liaise between the board of directors and the management
- Head and guide the managers
- Implement the company’s strategic plans
- Monitor the company’s financial performance
- Help in the hiring process involving the executive and top management in
- Represent the company in public spaces, especially during media interviews and industry events
So, there’s usually a clear divide between the board chair’s strategic governance and the CEO’s operational dynamism. The two, however, have to work harmoniously for the company to fulfill its mandate.
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Who Gets Paid More? CEO or Chairman?
The board’s chairman is the supreme authority figure. They decide who becomes the CEO and can even fire the CEO. As a result, the board chair commands a bigger paycheck.
Can the Chairman of the Board be the CEO?
In other cases, the board chair may be required to step into the CEO’s position—though in the interim. That often happens during a leadership shakeup as the company awaits the appointment of a new CEO. This arrangement can sometimes create a conflict of interest.
On the one hand, the board chair may favor the board they chair and undermine the executive’s influence and authority. On the other hand, the board chair concentrates more on the executive and undermines the board’s authority.
So, the two roles must be clearly defined. Most companies prefer to appoint two different competent professionals to lead the two dockets.
Chairman Vs. Director
Essentially, the board chair has to be a board member, either as an outside or inside director. The chair, however, is appointed or elected by the board members, who automatically become the supreme authority in the sense that they can appoint the board chair and fire them.
However, the chairman is the supreme authority when it comes to the power of heading the board and providing oversight. To be clear, the board of directors’ duties and responsibilities include appointing the board chair. The board chair, in contrast, appoints the CEO and may assist in recruiting other top executives.
Is the Chairman Higher Than the Directors?
The chairman is usually a member of the board of directors appointed by the board members by a majority vote to head the entire board. By virtue of that, the board chair holds a higher power rank than the individual directors. However, the directors collectively have supreme power as they can replace the board chair (again through a majority vote).
How Much Does a Chair of the Board Get Paid?
The average annual salary for a board chair in the United States is about $202,563. However, the salary range is $153,717 – $281,318, depending on factors like company size, level of education, experience, certification, and accomplishments.
Meanwhile, Kenyan companies like East Africa Portland Company, Kengen, and Kenya Power pay their board chairs Ksh 3 million—Ksh 3.4 million annually, which is quite impressive. But again, it depends on the company, as some Kenyan companies pay much less and others much more.
Challenges of Being the Chairman of the Board
Being a board chair can be lucrative, but that doesn’t make it seamless. The job faces a few challenges which relate to the following:
a) Balancing board members’ viewpoints
The board of directors consists of members from different backgrounds, with varying personalities and expertise that are likely to clash. However, the job of the board chair is to balance the viewpoints and act in the company’s interest, which could prove challenging.
b) Conflicts of interest
A CEO who serves as the board chair may find it challenging not to take sides and maintain a nonpartisan stand when making important decisions. They may end up leaning towards one group and undermining the authority of the other, which could spell problems for the company. That’s why most organizations choose to split the two roles between two well-deserving individuals who can coexist.
c) Corporate governance
Sometimes, the board chair finds it hard to foster a positive corporate governance culture, especially one built on transparency, accountability, risk management, and responsibility. That often happens when some board members are incompetent, unqualified, or ignorant of the corporate governance framework.
d) Succession planning
As the head of the board of directors, the board chair plans for the top-management succession, especially the CEO’s office. However, it may become a challenge when the same board chair doubles up as the CEO, as that will mean someone else nipping off some of their powers once they relinquish their CEO office. Again, companies try to avoid this challenge by splitting the two roles.
e) Micromanagement
Sometimes, the board chair, especially those who step into the CEO’s position as an interim, finds it difficult to resist the urge to micromanage the other executives and managers. Once that’s the case, it becomes an issue as they cannot work freely and enjoy the powers they ought to enjoy.
Where We ‘Center for Corporate Governance’ Come in
As the Center for Corporate Governance, we are a premier organization that provides specialized and tailor-made corporate governance consultancy services in Kenya and beyond. We believe that observing a solid corporate governance structure is the key to mitigating corporate risks, facilitating a positive corporate culture, and attracting investors, and that’s where we come in.
We invite corporate heads, especially the board of directors, board chairs, and top executives such as CEOs and managing directors, to sign up for our new monthly corporate governance training. This training explores the best and most effective corporate governance practices and tailor-made solutions to specific corporate governance challenges and problems. Visit our website for more details!
