Mon 11 Dec 2017
News - Directors' Day 2017 - Board Chairs' Practices across Countries: Commonalities, Differences and Future
Directors' Day 2017 - Board Chairs' Practices across Countries: Commonalities, Differences and Future
What is the role of the modern board chair? Quite recently this was seen as an honorary role, but now chairs are expected to contribute substantially to facilitating corporate governance and the supervision of strategy. According to Professor Stanislav Shekshnia, Affiliate Professor of Entrepreneurship at the management school INSEAD, chairs should seek to empower the board.
“The work of the chair is highly contextual, and depends on many factors,” said Prof Shekshnia, but still there are some best practice principles that aim to maximise the board’s efficiency and usefulness. He said the basic duties were clear: providing leadership of the board, and representing the board in relations with the CEO and shareholders. But how can they maximise their usefulness? Using his own experience as a board chair and board member, and recent academic research by INSEAD*, he drew up a list of “eight commandments”:
1. What got you here will not make you effective
2. Don’t build a team – enable teaming
3. Don’t sweat the boardroom – work other spaces
4. Don’t worry about the solution – organise the logistics
5. Don’t try to measure outputs – master inputs
6. Don’t be the CEO’s boss – represent the board
7. Don’t be a player – be a representative with shareholders
8. Don’t assume you will not need to get your hands dirty
Prof Shekshnia believes the first point is key. He sees the chair’s role as being fundamentally different to that of a chief executive. “CEOs are generally bold, decisive, risk taking, action oriented people, but chairs should hold back from taking decisions, and instead encourage collective decision making,” he said. Both roles require good general business acumen, but the chair needs restraint, patience, soft skills, and availability to offer support to management whenever needed.
From this key point flows much of Prof Shekshina’s advice. Hence his stress on enabling directors to come together when needed, often quickly in ad hoc teams. He believes seeking to build teams is an excessively rigid approach, as directors who can “team” in person or online are better able to adapt. This is linked to the third commandment, with the Professor suggesting that: “80% of what happens in the boardroom depends on what is done outside the boardroom.” For the meeting to run smoothly, it is best to address topics beforehand.
The chair must lead planning and pre-meeting work. Thus each director will be aware of what is expected of them, ensuring they are prepared to address known challenges, and to be switched on for potential surprises. Materials should be crisp and concise, follow up is vital, and the chair must use the analytical capabilities of board committees. After the meeting, post-mortems are needed to better understand what worked and what didn’t. With the right preparation, solutions have the best chance of emerging, Prof Shekshina advised.
“It’s better to start without a fixed view on the matter in hand: plan how the discussions will take place, and work out explorative questions,” he said. He counselled against talking with the CEO beforehand. He also suggested that the chair should speak last during meetings, while encouraging the board to develop at least three alternative solutions to each issue. He drew the analogy with a university teacher who engages and encourages. The process is somewhat softer than that often taken by executives. Rather than seeking to measure achievements through metrics, it is more about making the right preparations to ensure inputs are of the highest quality.
Thus, the aim is not to be the CEO’s boss, but to represent the board by providing support, while also challenging executives’ views. Similarly, the chair should be out-front with shareholders, representing the whole board as information is given and feedback received. Shareholder disputes must be headed off before they escalate, with fairness and transparency being the best tools. Finally, chairs should be available at any moment to help with an emergency.
In short Prof Shekshina pointed to the three Es of successful chairmanship. They must make sure that board colleagues are engaged, that they have been enabled to be effective, and that they receive encouragement.
*See the INSEAD website for their archive of research papers: https://www.insead.edu/executive-education/corporate-governance/leading-from-the-chair