Executive directors are uniquely positioned as both senior executives and board members. This dual role offers enormous opportunities... and potential pitfalls. Here’s what to look out for.
Executive directors wear two hats — that of a company employee, usually a senior executive, and that of a board member.
On top of their full-time executive position, they are appointed to the board. At law they have the same duties and responsibilities as other directors, whether it be for a listed, private, partnership or non-profit organisation.
In unlisted public and proprietary companies, it is often more difficult to separate the roles of managing and governing a company.
The owners of a smaller company often manage it as well — so technically, they are executive directors. It is not uncommon for the boards of smaller unlisted public companies and private companies to contain solely executive directors.
Executive directors can add value to boards through their:
Deep knowledge of the business, its strategy and direction
An understanding of the industry and the competitive pressures
Technical expertise in their functional area, for example finance, accounting, law
Greater access to company information than non-executive directors.
However, boards that never have meetings without the CEO when they are an executive director are just asking for trouble, says chair, board member and consultant Meredith Carter GAICD. “I’ve seen a board have to resign because they didn’t ever have meetings without the CEO. They had board members who had been there forever, but never meeting without the CEO is a terrible idea. Obviously, boards shouldn’t be meeting with the CEO when they’re discussing his or her remuneration, but there also need to be spaces where the board can have a general chat about anything that’s come up.”
Conflict of interest
Arrogance and ego can also create conflicts of interest. “I’ve seen CEOs who just get too arrogant,” says Carter. “There’s a conflict of interest. They have an interest in protecting their staff and protecting themselves — not necessarily being as open as the board really needs them to be. It can be a bit of a lonely position.”
CEOs who decide they know it all, totally dominate their staff and are dismissive of their board and its serious governance roles, do it at their own risk, adds Carter. “If for any reason it gets to a legal stoush, the courts are likely to be tougher on them.”
Two hats, two sides
The ability to see issues from both sides is a real benefit of having an executive director on the board, says Jason Titman GAICD, CEO and executive chair of cryptocurrency exchange Swyftx. “I find myself in conversations with C-suite executives saying, ‘That’s great, and I’m liking hearing this as the CEO, but I don’t think you’ve gone far enough for the board.’ Wearing the two hats gives you that ability to push your exec and say that paper is not yet ready for the board.”
This creates efficiencies in meetings because when the papers go to the board, there are fewer questions — or fewer unanswered questions — from the start of the discussion.
Patience and humility for an executive director is essential, notes Titman. Non-executive directors are not dealing with the day-to-day business and might serve on a number of boards.
If they ask a question, they are not trying to catch you out. They are asking a legitimate question they need answered in order to make a good governance decision, he says.
Dominance and control
Some executive chairs may face a perception that they are trying to control the company, which can be challenging. Titman says that at times, it is necessary, and not nefarious or driven by self-interest. “But there are examples where it is very difficult to say that some boards haven’t been manipulated by a powerful CEO or executive chair, so it is only fair to call it into question.”
Mental strain
A CEO might be asked to step out of a board discussion if there is an obvious conflict of interest, but an executive chair will be in those conversations. It could involve a potential acquisition, redundancies or bonus payments for the executives. Perhaps the CEO needs to be moved on and succession planning is underway.
Even for the strongest of people, it can be challenging to maintain privacy and integrity, particularly if the other executives are people you work with every day.
“When you are part of that inner circle wearing the executive and the executive director hats, there is an incredible mental strain on you in many respects,” says Titman.
“If you’re going to have an executive chair, then you need to think about your in-camera sessions and governance processes. You want to have transparency. In order to provide that transparency, there has to be that safe space.”
Two for one
Jason Preston MAICD, executive chair of McGrathNicol partnership and president of the non-profit Turnaround Management Association (TMA Australia), discusses the challenges and responsibilities of performing two roles.
How do you manage your dual roles?
My role as executive chair at McGrathNicol requires me to act as a business owner in partnership with the other partners; attract and manage clients to our business and deliver quality advice and outcomes to clients; generate revenue opportunities for the broader business; represent our firm in the media and in our industry; and take an active role in our governance structure and strategy. The most challenging part is determining how best to allocate my time to ensure I make a valuable contribution to each of these roles.
The role of executive chair affords a huge opportunity to influence the culture of our organisation from the top down, and I enjoy motivating everyone to move together in the right direction. My role is only possible in conjunction with my highly capable colleagues. I want them to feel empowered to progress important initiatives without me acting as a handbrake.
Explain the challenges of wearing two hats?
You are always considering an issue from the perspective of a person in the business or from a governance perspective. Be mindful of the bias and conflicts you will subconsciously bring. I try to challenge my decisions from the perspective of “would an independent person consider the issue and conclude in the same way?” When you come to a position, consider how you would explain your decision to stakeholders objectively. There are some issues that can be so conflicted, however — remuneration being an obvious one — that it is important for the board to discuss and debate without the conflicted person in the room.
What’s a key guardrail when participating in board meetings?
There is no point bringing together a board of people with different perspectives and experiences if the chair dominates the agenda and debate. This is particularly important for an executive chair, who likely brings a deep, first-hand knowledge of the business operations. As a restructuring professional, I have seen many companies find themselves in a difficult position because of dominating CEOs or chairs who have ignored the valuable advice of those around them.
This article first appeared under the headline 'Double duty’ in the May 2025 issue of Company Director magazine.
Practice resources — supporting good governance
AICD’s contemporary governance practice resources for members:
Executive directors
- Role of executive director
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