Chairmanship: The Effective Chair-CEO Relationship - Insight from the Boardroom

Abstract

The 2011 Chairmanship report published by Yale’s Millstein Center for Corporate Governance and Performance examines the question of how the non-executive Chair and the CEO, both important roles in the corporate governance, can work together effectively toward the corporate best interest. Based on interviews with dozens of CEOs, non-executive Chairs, and stakeholders, the report paints a picture of how the effective relationship works.The report identifies three major areas that characterize an effective working relationship: chemistry, a clear framework, and a supportive context. Most commonly mentioned in interviews was good Chair-CEO chemistry – that is, the direct interpersonal relationship between the two. Expanding on the chemistry concept, Chairs and CEOs identified effective communications as underlying factor. Effective communications included frequent contact, open, ongoing dialogue, and a mix of formal and informal venues. Also supporting good chemistry was reciprocity and consideration – keeping each other well informed, avoiding surprises, and assuming good intent.Communications should be purposeful – and while the relationship might be close, it should not become a personal friendship. Chairs and CEOs alike felt their good communications created an overall environment conducive to sharing, learning, and confidence.Other areas, such as a clear framework and a supportive context were also identified. A clear framework also meant having the right processes, usually around key areas of board responsibilities such as managing the board agenda, material financial decisions, major transactions such as acquisitions, compensation, C-suite personnel, and succession planning. Three elements of board context also effected the Chair-CEO relationship – a talented executive team, a strong supportive board and a culture of transparency promoted an effective working relationship between the Chair and CEO.As this leadership structure becomes more prevalent, these insights and guidelines should be useful to those working together in these interdependent roles. Effective working Chair-CEO relationships may create value for shareholders in ways that neither leader could do alone.