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.

Deciding to separate the roles of chairman and CEO is only the first step in a process fraught with hazards. Much hinges on personal interactions, which are hard to predict, and problems are bound to arise during the transition. But boards that identify the potential pitfalls and develop strategies to avoid them are much more likely to achieve a smooth separation.

Bob Felton is a director in McKinsey’s Pacific Northwest office, and Simon Wong is a consultant in the London office.

How Much Involvement Is Required?
Issues Facing
the Board
Chairman’s Role
Light Heavy
Corporate strategy
  • Strategy defined, well understood (internally and externally)
  • Company is simple/single business entity
  • Complex diverse portfolio
  • Major strategic orientation required, company is new or in transition
  • Recent/pending merger or acquisition
Management issues
  • Experienced CEO, management team in place
  • Strong rampant, trust, and confidence between CEO and board
  • New or inexperienced CEO, management team
  • Significant upgrade in management capabilities needed
Shareholder value/corporate performance
  • High corporate performance
  • History of poor performance management
  • New performance standards required
Other governance issues
  • Established board in place
  • Culture aligned with strategic objectives

  • Undefined governance, leadership structure
  • Strong cultural legacy requiring transformation

 

Clearly Define the Roles

Chairman, Overall Responsibility

  • Ensure board sets and implements company’s direction, strategy effectively

Chairman, Specific Duties

  • Provide leadership to board
  • Plan board meetings, agendas
  • Ensure board receives proper information
  • Chair all board meetings
  • Ensure that all directors contribute
  • Drive discussion toward consensus
  • Determine composition structure of board
  • Chair shareholders’ meetings
  • Act as company’s lead representative: explain aims, policies to outside world

CEO, Overall Responsibility

  • Responsible for performance of company as dictated by board’s overall strategy

CEO, Specific Duties

  • Develop, implement strategy reflecting long-term objectives, priorities established by board
  • Assume full accountability to board for all aspects of company operations, performance
  • Maintain ongoing dialogue with board chairman
  • Build, maintain effective executive team
  • Put adequate operational-planning, financial-control systems in place
  • Closely monitor operation, financial results in accordance with plans, budgets
  • Represent company to major customers, professional associations

Source: Institute of Directors (U.K.)

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