How to Separate the Roles of Chairman and CEO

Many companies that thought they knew how to split them stumbled along the way. Five steps can make the process smoother and more successful.

A willingness to ease into the background requires a degree of humility that is perhaps unusual for anyone who has climbed so high. At a leading U.K. food and beverage company, the chairman occupies a small, nondescript office to let employees and others know that he doesn’t run the company. In contrast, the chairman of a prominent U.S. company continues to occupy the same spacious office he had when he was also the CEO, which may suggest to employees that he still runs the company rather than just the board. One U.K. chairman described the difficulty of making the transition:

“There is a process of withdrawal. You’re used to being famous and in demand all the time, both internally and externally. You’re used to being the boss. All these things are drugs. In a sense, it’s the end of an ambition that’s been around a long time — to be a success as a CEO — and all of a sudden you’re not going to be one anymore. There is loss and grieving. But then you come to the realization that what you’ve taken on is more than you thought it was and you say, ‘Well, am I ambitious to become a good chairman?’ and it’s the start of something different.” (John Roberts, On Becoming Company Chairman: Building the Complementary Board, London: Saxton Bampfylde Hever, 2000).

In the United Kingdom, many chairmen are former CEOs of other companies who, having already climbed to the commanding heights of management, are now happy to play a less visible, supporting role. They are often a decade or so older than their CEOs, and this age gap seems to enhance their ability to serve as mentors. In the United States, a few companies appear to be replicating this pattern.

Often the chairman comes from the ranks of the company’s current non-executive directors — ideally, one who has served on the board for several years and knows the business well. This two-step path to the chairmanship is gaining broader acceptance. The board of GlaxoSmithKline, for instance, appointed Christopher Gent as an independent director earlier this year with a view to having him succeed Christopher Hogg as chairman at the end of it.

Like finding the right chairman, finding the right CEO can be a delicate problem. Over and above the intellect and drive needed to manage a company, a chief executive must have a healthy respect for the authority of the chairman and the full board. That may be a tough pill to swallow for a CEO — especially a former chairman-CEO — who is accustomed to a hands-off attitude on the part of the board. Indeed, this kind of resistance is one reason for requiring holders of the combined position to relinquish both roles. The chief executive controls key corporate resources and often regulates the flow of important information to outside directors. A CEO who isn’t a collaborative partner with the chairman can have extremely bad relations with the board and undermine its effectiveness. Any CEO candidate who isn’t willing to work cooperatively with the board and the chairman should therefore be eliminated from consideration. As former ICI chairman Denys Henderson has said, “The success of the nonexecutive-chairman arrangement is heavily dependent on the chairman’s relationship with the CEO. If the chemistry isn’t good, the relationship isn’t going to work. And if the relationship does not work, the board and the company are in serious trouble.” It is thus important to ensure that the chairman and the CEO have complementary skills, styles, and personalities.

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