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Chair/CEO Roles Increasingly Separate

Common wisdom used to dictate that the chairman and CEO be the same person. Having two leaders at the top just confused things, especially if the chairperson was the ex-CEO.

In the post-Enron era, however, conventional wisdom is changing. Greater weight is being given to the board’s oversight responsibilities. Greater recognition is being given to the time-consuming detailed care required of the CEO. The chairman’s real work of managing the board and the recognition that the CEO really doesn’t have time to it, is leading to the separation of the roles in both public and private companies. In short, two heads are better than one.

Avoiding confusion and conflict when the chair and CEO are different people takes some thoughtfulness and effort. Chairs may move their offices offsite. Responsibilities are clearly delineated with everyone understanding that the CEO is in charge of the company. The chair often serves as a mentor to the CEO, being careful to coach, suggest or model behavior so that the CEO is independent and clearly responsible for his or her own decisions.

Communications between the CEO and chair should be regular, appropriately frequent (weekly is common) and used to keep the chair informed or to seek advice. Never should permission or approval be solicited from the chair, nor should the chair attempt to provide it.

As a succession strategy, a chairman/CEO relinquishing the CEO role and remaining as chairman can work if the chairman works hard to respect the CEO’s authority. But outside, non-executive chairs are also becoming more common in family firms. Sometimes the older generation leader is incapacitated or deceased. In other cases, a retiring owner/manager wants to avoid potential confusion as to who is in charge or simply doesn’t feel that he or she has the skills or experience to be the most effective chair. In any case, the dilemma posed by the CEO effectively having to report to himself is solved.

We encourage family business boards to thoughtfully and flexibly consider the role of the chairman and the important work of the board. Now more than ever, the chair has a real and important job requiring special experience and maturity.

 

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