Why CEOs make bad chairmen

Sep 30 2008 by Nic Paton Print This Article

In these nervous times, a steady, experienced chairman Ė and they are still mostly men Ė is a sought-after commodity. Just don't expect your chief executive to be the right person for the job, whatever his vaulting ambition or expectation.

Research by UK recruitment firm Directorbank has identified a range of attributes that, in an ideal world, good chairmen should have, or at the very least aspire to.

But the poll of 430 directors serving on more than 900 boards also found a worrying inertia within boardrooms when it came to removing under-performing chairmen, with four out of 10 firms admitting they had no mechanism in place to remove and replace a chairman that was not pulling his weight.

The research found that what directors sought most from a chairman was someone who was never afraid to ask questions, even if they appeared silly, and who was happy to sit back and let the executive team take the credit for success.

Key attributes included charisma, patience, an ability to listen and mentoring skills.

Business experience, perhaps unsurprisingly, was also rated highly, particularly calmness under pressure or when experiencing tough trading conditions.

An ability to manage the competing egos and conflicting priorities of the modern-day boardroom was also felt to be a valuable attribute.

Similarly, managing the conflicting demands of shareholders and stakeholders was seen as a massively important skill.

An effective chairman also needed to have a good network of contacts that they could call on and be willing, within reason, to take risks.

When asked what sort of attributes they would not want to see in their chairman, the majority of the directors polled were very clear in saying those who dithered or failed to listen made poor chairmen.

Similarly, those who had a poor understanding of the sector they were working within or were unable to exert control over the board also tended to struggle.

One director surveyed said of a poor chairman: "He was only there for the title and money....abandoned management at the first sign of trouble."

Others criticised chairmen who were "totally into networking and nothing much else" or those who did not like to get their hands dirty.

While most of the directors polled said they had worked with a director they considered outstanding, more than three-quarters said they had also worked with an ineffective chairman.

Yet four out of 10 of those polled also said their organisation had no mechanism in place to remove a failing chairman.

And only one director in five thought it worth even trying to improve an under-performing chairman.

Almost all said a board only worked effectively if the chairman and chief executive roles were held by separate individuals Ė an issue that has caused much wringing of hands recently at retailer Marks & Spencer, where chief executive Stuart Rose has moved to become chairman. Intriguingly, this view was also shared by the chairmen interviewed.

What's more, nearly six out of 10 of the directors polled said a chief executive should not normally step up to become chairman of the same company, as they normally brought with them too much baggage or would be too concerned with defending their past record.

The skills needed to be a chief executive were completely different to those required for chairing the board, they argued, so moving from one to the other should not be seen as a logical progression.

Directorbank chief executive Elizabeth Jackson agreed the survey revealed near universal agreement that the skills required to be a company chairman were very different from those of a chief executive, and that this was not always fully understood.

"There are significant benefits attached to a chairman coming into a company with no baggage and an entirely fresh perspective. And that is every bit as true for a family business as a plc," she said.

"With the challenges facing so many businesses over the coming months, and some difficult and painful decisions likely to be made, companies need to have everyone pulling their weight, not just on the factory floor or in the office but also in the boardroom. No-one should be immune," she added.