Henri Eliot: What makes an outstanding chairperson?

Many of the functions of a chairperson are customary - rather than formalised by any law. Photo / Thinkstock

Opinion

The chairperson has been described as "first among equals" and is appointed to the position of chairperson by fellow board members, not shareholders. The chair acts as an important link between the Board and the CEO/Company. Thus many functions of the chair are customary rather than formalised by law.

What is the role inside the boardroom?

• Acting as an important link between the board and the company without inhibiting direct access of fellow directors;

• Establishing and maintaining an effective working relationship with the CEO;
• Setting the tone for the board, including the establishment of a common purpose;
• Chairing board meetings efficiently and shaping the agenda in relation to goals, strategy, budget and executive performance;

• Obtaining appropriate information to present to the board;

• Encouraging contributions by all board members and seeking consensus when making decisions;

• Motivating board members and where appropriate dealing with underperformance;
•Instituting the process for appraising board members individually and the board as a whole;

• Overseeing negotiations for the CEO's employment and evaluating the CEO's performance;

• Planning for the succession of senior executives, including the CEO; Assisting with the selection of board committee members.

What is the role outside the boardroom?

• Communicating with shareholders on matters of corporate governance;

• Chairing shareholder meetings - annual and extraordinary general meetings (AGMs and EGMs);
• Increasingly, being available to speak with large institutional investors. ?

What happens when a chairperson does not perform effectively?

A chairperson can only be effective while he or she retains the confidence and respect of board members. An underperforming chairperson may be asked to step down by other directors but, in respect of all public companies and most private companies, can only be removed from the board by a vote of shareholders. Most would choose to resign rather than face re-election without board endorsement. ?

Should the chairperson be independent?

Following best practice, the chair should be an independent director. This means that the chairperson is free from potentially conflicting relationships with the organisation - e.g. being an executive or professional adviser within the last few years, being a substantial shareholder or supplier, and having no material contractual relationships with the organisation. ?

What are important personal traits?

A balance of desirable personal traits for a chair for example includes:

• Tact, diplomacy and sensitivity

• Ability to reconcile opposing views

• Strength and clarity of purpose

• Ability to lead by example

• Ability to encourage and get the best from all team members

• Power to influence.

Does the Chairperson have additional responsibilities?

Recent court cases have created debate on the role of the chair. Public scrutiny of the role of the chair has increased due to corporate collapses like One.Tel and HIH in Australia and a number of finance companies in New Zealand.

The resulting court decisions suggest that there is an argument that the chair's role as one that carries additional responsibilities. These additional responsibilities involve leadership, governance and proper management of meetings. So far there is no legally binding precedent and the question awaits a definitive answer from the courts or Parliament in New Zealand.

Overall, all Chairs have their own unique approach to the role, which is indicative of their core personality, experience and the context in which their business operates. Styles vary from that of 'Chief Coach' to the 'Strong Commanding Leader'. Whatever the style, good Chairpersonship can go unremarked by many and is always more difficult than it appears. Also, It is always the fruit of learning from experience, of the kind that we have sought to capture here.

Being a Chairperson is a challenging and responsible position. Huge complexity of problems, real engagement from brilliant minds around the table in protecting shareholder value with a balanced return on capital.

Henri Eliot is CEO of Board Dynamics