By Christiane Schloderer IDP-C, IDN Middle-East Ambassador
The role of a board’s chair is not new. Yet the picture of the “grand old man” making autocratic decisions of a company’s fate has long vanished. In times of unprecedented change and transformation requirements, the Chair’s role is gaining complexity – it resembles more a conductor who is “First among Equals”. Overall, the changes are substantial: faster, shorter, with more Zoom, especially with Covid putting a huge pressure on boards.
In an inspiring web session, Professor Stanislav Shekshnia, Affiliate Professor INSEAD presented the findings of his latest research around Chair best practices, with comments by IDN President Helen Pitcher OBE.
An effective chair
- Focuses the board
- Adjust the board’s processes and structures
- Organizes the strategic process.
Focusing the board
Boards tend to get more pressure from the outside, but have limited time, energy and attention span. The chair’s role is to establish ways to determine how the board fucuses. Focusing a board is less about what to focus on, but rather how to focus.
Professor Shekshnia identifies four levers to establish focus:
- Board purpose
- Board agenda
- Discussion questions
Boards need a clear answer to a few fundamental questions like “Who do we work for? What do we try to achieve? What functions do we exercise? What are the Do’s and Don’ts for this board? And how do we measure ourselves?”.
Around 33% of survey participants during his research said they have discussed the purpose, half of them said they have changed it during the pandemic.
However, even more important than the actual purpose is to have a shared purpose. It’s the chair’s role to generate this by ensuring space for a healthy discussion around the board’s purpose. Putting the purpose in writing allows to continuously refer to it, it’s a yardstick for discussions, decisions and the agenda setting.
A board’s agenda reflects the “right” issues: it fits the board’s purpose and its strategic. The topics under discussion should be material, they should have a long-lasting effect and should allow for a meaningful discussion. If the discussion topic cannot be handled within the time given in the board meeting, it should not be on the agenda.
Typical core topics of the board’s agenda are leadership, strategy, company configuration (where to invest in, what to divest), risks, ESG and sustainability and stakeholders (what, when and how to tell them).
Agenda setting can happen in various ways: the CEO proposes the agenda, the (very involved) secretary draws it, or the boards gives its own agenda. However, no matter who proposes the agenda, an effective chair owns and feels responsible for it. The chair has the last word.
Once the board meeting is on, the chair’s role is to frame the discussion by formulating the question – a very powerful tool.
Effective chairs solicitate ideas from other board members before and after the board meeting, they provide context around the situation and the challenges involved, they frame the question to make it understandable to all board members and reframe if required. They also give each director enough space to develop their opinions, while ensuring that each director gives enough input.
The board’s evaluation ties up with the purpose: how does the board perform against the purpose and why is the board making decisions the way it is. Further evaluation topics center around the quality of the agenda, the board’s process, its decision making and the board’s fitness.
A combination of formal and informal evaluation proofs effective. Whereas a formal evaluation is conducted once or twice a year, after each meeting, informally it should be decided what to keep and what to change for the next meeting.
The core questions a board should ask itself is if it has collective time and energy to lead the company going forward. If the answer to this is no, drastic changes become necessary.
Adjusting the board’s processes and structures
As a consequence of focusing the board, adjustments to the board’s processes and structures might need to be required. Again, the chair should own the adjustment process, after taking input from other directors, the CEO, shareholders or other stakeholders. Changes to the external environment should be taken into consideration.
Emerging trends for adjusting the process are a hybrid form: face-to-face for substantial debate and virtual for more straightforward issues. The pandemic has forced shorter notice meetings with a more flexible agenda as well as shorter and more frequent meetings.
Emerging practices for adjusting the structure are an annual board competency mapping, temporary board committee, a nomination committee closely cooperating with the chair and drawing in experts.
Boards should match the strategy with the competencies of its board members whereas the chair would be strongly involved in building the board composition.
Organizing the strategic process
When looking at the strategic process between boards, chairs and the CEO, there is no one model. It depends on the context of the industry, the company and its competencies and the individual situation. The most common forms are as follows:
- Board provides guidelines and approves strategy developed by management
- Board develops strategy with heavy management input
- Strategy committee proposes strategy
- Joint board-management effort
- Continuous strategic conversation at the board
- Chair: leads, facilitates, makes sure it happens, supervises
Some boards define that strategy is being considered in a one-off meeting, other say that strategy never stops. The chair’s role drives, supervises, facilitates – it depends on the company. It is important that the chair, but also all other parties involved are clear and agree about each participant’s role.
The role of the chair
Covid has put a huge pressure on boards. It has often required a lot more of interpersonal contact between the chair and the rest of the board. Accordingly, the chair role has become more onerous in terms of time commitment as well as crucial role outside the organization with stakeholders.
A chair’s workload is probably double to other board members; yet chairs need to be careful not to overstep the boundaries into the executives. Chairs have the privilege of more information and thus find it easier to guide the executives. Being a chair requires a different skillset. “Nose in, hands out” is a good guideline, although there is a tendency that chairs work more according to “nose in, hands on”.
Follow on discussions
During the IDN call’s polls, the breakout room sessions and the following Q&A, generally similar views were exchanged:
- Only 38% of participants responded positive about having a yearly discussion around focus, whereas 48% responded they do not have a yearly discussion around focus
- However, 31% disagreed when asked if they have a yearly discussion around adjusting board processes and structures and 44% responded they do have a yearly discussion.
- An impressive, yet not surprising majority of 86% are significantly more involved in strategy development since the pandemic started compared to earlier years, with only 3% disagreeing.
- The new norm of short, but frequent video conferencing does not prevent drastic corporate restructuring from happening. Although a face-to-face interaction is likely preferred in that situation, results from a virtual format can be impressive too.
- An active chair leads to inactive board members and vice versa. Not too weak, not too strong, not too cozy for the directors. A chair needs to keep the distance yet be available. Push, yet, let others drive. She or he should seek a healthy balance.
- Yet, the chair role is pivotal to setting the right dynamic, keeping the board on track, ensuring the board remains functional.
After all, being a chair is a balancing act. It’s never straight forward.
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Established in 2010, the INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance. The ICGC harnesses faculty expertise across multiple disciplines to teach and research on the challenges of boards of directors in an international context and to foster a global dialogue on governance issues with the ultimate goal to develop boards for high-performance governance. Visit ICGC website: https://www.insead.edu/centres/corporate-governance