The Chairperson is the owner of the strategic direction of the business and responsible for the running of board meetings. He or she is responsible for ensuring that it is clear, agreed by everyone and adhered to. This is often, though not always, a Non-Executive role, so the strategy itself is defined by the executive board but stewarded by the Chairperson. Under the FCA’s proposed Senior Managers and Certification Regime, Chairperson is a new regulatory function.
Why would you need a Chairperson?
- An external investor will often require an independent Chair to be appointed to act as a buffer between the board and the investors. In addition to providing comfort to investors that the board is independently monitored, a Chairperson should provide a sounding board and mentorship to a CEO and help manage expectations.
- Growing businesses can struggle to formalise the relationships and responsibilities between the senior management team. As a result board meeting often don’t happen or can feel strained or dysfunctional. An independent Chairperson would take responsibility for defining a clear structure for the board, MI circulated and behaviour in the meeting. Someone new and separate from the business can often achieve this because they have the time and experience, and do not bring any history of working within the business to the meeting.
- A business owner who is looking to divest more responsibility for the running of the business to the management team may consider appointing a Chairperson with a mandate to build a ‘succession’ board which can work effectively without the owner who can eventually exit or become a Non-Executive Director policing his or her shareholding. The Chairperson provides continuity and support during the transition.
- A Chairperson might be appointed early on in consideration of a future business sale. The Chairperson would give greater structure to board meetings and management information which would assist future due diligence and add credibility in the eyes of a purchaser. Some specialise in business sale and will approach potential buyers on behalf of the business.
What would a Chairperson get involved in?
- Attendance at board meetings, production of the agenda, agreement of dates and format and content of board packs and minutes.
- Management of the board meeting, with input and comment where relevant.
- Input into and interviews for board appointments.
- Comment on areas of weakness or gaps within the existing board.
- Setting of business strategy and attendance at strategy sessions.
- Monitoring that the strategic direction and high-level business metrics remain on course.
- Sit on committees where necessary. Typically, this will be a remuneration committee and/or an audit committee.
You can also expect
- To be informed about any potential conflicts with other positions.
- For them to keep their knowledge and skills up to date.
- For them to understand their legal and regulatory responsibilities as a director, and you may need to offer training on this if they are FCA authorised.
- To undertake thorough diligence and references on them as you would any senior member of staff.
What not to expect from a Chairman
- Taking minutes – you need to ensure that someone reliable is available to take down minutes, although a Chairperson will review and edit them before issue.
- Making decisions – unless you’ve given them an executive role, a Chairperson is there to guide and advise but the board is still the decision maker. That said, it is a board role which comes with some personal liability so a Chairperson may resign or whistle-blow if malpractice is observed, and some issues may require Non-Executive Director approval such as director pay increases.
- Socialising – a Chairperson is there for support, guidance and confidential discussions, but it is a purely business relationship. Straying outside these boundaries can be detrimental to an independent role where challenge is required.
- Consultancy – a CEO can expect a Chairperson to be available for calls and provide advice on board matters but there is a line where this can cross into consultancy, which should be billed separately. You should agree in advance where that line is drawn.
£30, 000 per annum.