Is the role of the chair changing?

Once a ceremonial or advisory role, the responsibilities and challenges of chairing a board are continuing to evolve.

While much has been studied and written about the characteristics and motivations of the top executive, comparatively little public discourse focuses on the chair: the individual in charge of running the board of directors responsible for the organisation’s governance and long-term sustainability.

A recent study for INSEAD’s Leading from the Chair program, which included a survey of 118 chairs of medium and large company boards from 30 countries, reveals that the job of the contemporary chair is very real and hands-on, requiring close interaction with board members, company management and stakeholders.

Predictably, the majority of the respondents (91 per cent) were senior (by age and experience) men — a trend that is expected to continue. Most were also well educated and a majority have held CEO positions.

While demands for a more engaged board have changed the role of the chair in some respects, the lack of gender diversity is still evident. Less than 10 per cent of respondents to our survey were female. The study also found that female chairs were more experienced and better educated than their male peers, suggesting that only women with outstanding qualities made it to the very top.

Challenges

The top four challenges facing today’s chair are:

1. Maintaining good relationships with the controlling (or larger) shareholders;


2. Managing difficult board members;


3. Maintaining a level of collaboration and teamwork amongst these individuals;


4. Processing large amounts of information about the organisation.

Surprisingly, challenges such as “low motivation and absenteeism of board members” and “insignificant time commitments of board members” – often cited as major obstacles to board work in academic and business literature – did not seem to worry our respondents. This may reflect the fact that boards have become more engaged and directors more responsible and involved.

Remuneration

While challenges most boards face are similar in many respects, there is great diversity in the levels of financial incentives offered. Predictably, company size has some impact on the chair’s compensation, with almost half of small companies paying less than $50,000 a year. However, the other half pay more than $1 million. This reflects the fact that the “market” for chairs is not well developed.

While not-for-profit organisations in general reward their chairs modestly, remuneration is otherwise defined not by organisations but by the capabilities, experience and market value of the individual regardless of gender.

Accession to chair

From a governance point of view, the chair should be proposed by the nomination committee and elected by the board. The reality, however, is that shareholders play a decisive role in finding and selecting a future leader of the board, making sure they have in the position someone they know, trust and can predict.