Company Chairman – An Odd Job

Written by on January 26, 2015 in Board Role and Duties with 0 Comments

Black and white photo of bookcase and chairCompany Chairman – An Odd Job

[Of course I use “chairman” in an inclusive sense.  Many prominent Australian women who chair boards use “chairman” as their job title.  I defer to them.]

To start with, a company chairman is a director, and has the duties and responsibilities thereof (see for example my article
What Is a Board’s Job Anyway?
).  But there’s more: what else, exactly, does the chairman do?

The Corporations Act says: “The directors may elect a director to chair their meetings.”  Later it gives the chairman a casting vote, in case of a tied vote.  That is the only legislative basis for the job.

But nobody thinks that’s all there is to it.  Acknowledging what really happens, the common law (case law) goes much further.  The judge in the OneTel case, following ASIC’s line of argument, agreed that the company chairman “[has] responsibilities beyond those of other directors”, and the list of these has become the basis of ASIC’s position (see their brief 2003 media release explaining this).

In brief, ASIC now considers the chairman’s job to include responsibility for:

  • “The general performance of the board;
  • The flow of financial information to the board;
  • The establishment and maintenance of systems for information flow to the board;
  • The public announcement of information;
  • The maintenance of cash reserves and… solvency; and
  • Making recommendations to the board as to the prudent management of the [company].”

Suddenly, it’s a pretty big job, isn’t it?  How is it to be done?  The chairman cannot be the boss or manager of the board, in the sense of telling the other directors what to do.  Each director has a duty to form an independent, well-informed view of the company’s best interests, and act on it.  Directors are responsible, collectively and individually, for every board decision.

What the chairman can and should offer is leadership: influencing, mentoring, advising, coordinating.  The Australian Institute of Company Directors advises that a company chairman should:

  • “Lead the board in defining and understanding its role;
  • Lead consensus on how to deal with issues such as disagreement, confidentiality, or conflict of interest;
  • Understand the needs, problems and attitudes of each individual director, and have frequent one-on-one conversations with each colleague;
  • Maintain close relations with the CEO (GM) and understand management’s concerns and intentions;
  • Chair general meetings of members [ie. shareholders];
  • Lead the board in reviewing and improving its own performance;
  • Periodically ask the board to evaluate the chairman’s own performance and make suggestions for improvement.”

One more thing: it’s accepted all round that the axis, the communication and working relationship, between the chairman and the CEO is absolutely critical to the health of a company.  They’ll disagree; but if they stop talking things will go wrong very quickly.

So what emerges is perhaps the ultimate “soft-power” job.  For this very important task, a company chairman relies on influence, example, consultation and leadership skills.  Worth remembering that when we read the financial press, would you agree?

Here’s a role with enormous impact, for good or ill, on the health of a company; that’s almost invisible except in an AGM or a crisis; that starts where formal task descriptions stop – and it’s not about “taking charge” or “making it happen” or otherwise ordering people about.  It’s about consultation, influence, example and leadership.  A keystone of our system of company governance is all about soft power.

Speaking personally, that leads me to more and deeper respect for successful company chairmen, male and female.  You need a very well-rounded skill set indeed for this job.

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