The chairman's job description: time for a change in your governance leadership? In the post-SOX era, there is a new interest in separating the top jobs. Here is what's required of the nonexecutive chair.

AuthorLorsch, Jay W.
PositionDUTIES OF DIRECTORS

IN THE UNITED STATES it has long been accepted practice for the CEO and chairman of the board to be the same person. In other English-speaking countries, and in Continental Europe, the jobs of CEO and chairman are almost always separated. The scandals of 2001 have sparked increased pressures to improve the functioning of America's corporate boards, including a new interest in separating these jobs. While there is nothing in the Sarbanes-Oxley Act or the new stock exchange listing requirements to indicate that the jobs be separated,

the general interest in improving boards has led directors and management to take the idea more seriously than in the past.

For those directors who are considering separating the jobs, we offer a position description for a separate chair. Our description of these duties draws a distinction between the chair's responsibilities and those of a CEO.

The chair, the board, and the CEO

The chair's overarching responsibility is to ensure the board's effective functioning. This simple statement requires some elaboration, because the notion of an "effective" board is too often taken for granted, as though it is crystal clear what all boards ought to be doing.

It is broadly understood that boards should only "govern," and must delegate the running of the company to management. But what the governing role should entail varies from company to company and is usually not clear to board members. It can range from a "watchdog" role to a more involved "pilot" role. So an initial step toward a genuinely effective board is to develop a clear, shared conception of what the board is aiming to accomplish.

It is up to each chair to lead the board to a clear understanding of its role. Obviously, the chair cannot impose his will on the board, but it is his responsibility to see to it that the result is clarity--and not confusion--among the directors.

We emphasize that the chair's job is to lead such discussions, because we believe each chair should be clear in her own mind--and should ensure that the rest of the board and members of management are equally clear--that the essence of her job is as a facilitator and enabler of the board, and that all of her own powers as chair are derived from the authority of the board. Simply put, the chairman is the chairman of the board, and not of the company. An important corollary is that the CEO reports to the board, and not to the chairman. If the chair treats the CEO as his subordinate without involving other directors, it will likely undermine the effectiveness of the board as a whole.

Leading the board

Once the board has agreed on its role, the chairman should focus on enabling the board to carry out its duties. To do this, he must accomplish the following:

* Keep the Board Focused on Governance, and Out of Management. This responsibility flows from a clear conception of the board's broad objective--to govern the company within its defined role. With this definition in mind, the chair must ensure that the board stays focused on the issues falling within its own domain, and not on those properly left to management. This means the chair must develop a thoughtful perspective on what specific issues should come to the board, and reach agreement with the CEO about this.

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