The top chairs

The role of the chairman as leader of the board of directors is critical for the long-term success of a business.

by Des Dearlove and Steve Coomber, World Business
Last Updated: 23 Jul 2013

If we were in any doubt, the debate about corporate governance ignited by Enron, Sarbanes-Oxley and the rest, has served to underline the importance of the board of directors in corporate affairs in the 21st century. Yet, for all the attention that boards have received, one critical aspect has remained largely neglected - that of the role of the chairman. The chairman is the leader of the board, and the board oversees the management of the company. Yet Sarbanes-Oxley - and a great deal of the media coverage surrounding it - focused on the role of the CEO and, to a lesser extent, the chief financial officer. The same can be said of the literature in recent years: witness the many books on the role of the CEO compared with only a handful on the chairman.

A new book aims to correct this imbalance. Leading the Board: the six disciplines of world-class chairmen (2007) examines the rise and fall and rise again of the role of the chairman. Authors Professors Andrew and Nada Kakabadse, of Cranfield School of Management and the University of Northampton Business School respectively, argue that the role of the chairman has never been so important - nor so misunderstood. Their central argument is two-fold: first, that the role of the chairman is distinct from any other on the board or elsewhere in the organisation, requiring its own unique set of skills and qualities; and, second, that the role of the chairman as the leader of the board of directors is critical for the long-term success of the firm - and the best protection against corporate excesses. In short, world-class companies require world-class chairmen.

For many people, the role of corporate leader has become synonymous with the CEO, but this is a relatively new development. The chairman was and is a central, historical point of reference, dating back to the first joint stock companies in the 17th century. These early, volatile and high-risk investment entities adopted a makeshift form of governance. Those tasked with the responsibility of overseeing the company met regularly - albeit in a rough-and-ready fashion. A long board was laid across two sawhorses and the group that assembled around this crude table to discuss their affairs became known as the board. The leader of the group became known as the chairman simply because the individual sat on a chair, while the others had only stools.

The chairman, then, was the first executive to lead the board meeting, and it was he who had to win the confidence of investors, determine the nature of the enterprise, and hold the managers and employees accountable. In the past, the chairman's role was recognised as the one that handled the contradictions and ambiguities, balancing the interests of all the company's stakeholders - but now the CEO is seen as the one to carry out this juggling act. This is most pronounced in North America, where the dual role of CEO and chairman is commonplace.

"All the evidence and research points to the importance of an effective, well-led board," say the authors. "But the one role that has been largely neglected is the most important of all: the chairman. Put simply, without an effective chairman there cannot be an effective board. And, even when you have a great CEO who is also the chairman, their CEO skills are not sufficient on their own to ensure a well-led board. We believe it is high time this fact was acknowledged."

So, what should we look for in a world-class chairman? The Kakabadses' research, which extended to more than 12,000 organisations in 17 countries, and an additional 400 board members, has persuaded them that some elements of the chair's role transcend national boundaries and differences in board structure. These are the six disciplines of world-class chairmen:

Delineating boundaries. It is only by clearly delineating boundaries between roles that the board - and the chairman - can function effectively.

Sense-making. Chairmen must communicate and champion the organisation's mission, values and strategy, so that they resonate with an array of internal and external audiences. This sense making has two aspects: the use of logic and chemistry.

Interrogating the argument. A key role is to interrogate management about strategy and policy. Boards should decide if they want to consider proposals by dialogue or debate. The chairman should ensure that the discussion is constructive.

Influencing outcomes. A chairman can do more by influencing decisions than issuing commands. The five steps toward effective influencing are: surfacing sentiments; working through divisions; using judicious speech; focusing on the salient points; and scheduling meetings to align expectations.

Living the values. Trust and integrity are critical. It is important for the chairman to be aware of the ethical challenges confronting a board, and its values.

Developing the board. All boards and chairmen need to be developed. Development starts with a process for assessment and review, and is a specialised topic.

So who are the leading chairs? Using the Kakabadses' criteria and a few sounding boards, we have come up with 12 names. What follows is not an exhaustive list of the world's top chairmen, but a selection of those who have mastered the disciplines that a world-class chairman must deal with. Some are well-known, others less so - what all have in common is a proven track record in the toughest job of all: the leader of the board.


Great chairmen make sure they leverage the experience of the board members to the advantage of the organisation. Don Argus, executive chairman at BHP Billiton, one of the world's largest natural resources companies, excels at this. Argus became chairman of the Broken Hill Proprietary Company (BHP) in 1999 and then, following its merger with UK company Billiton, non-executive of BHP Billiton. As well as his position at BHP Billiton, he holds a host of other board positions. Former CEO of National Australia Bank and chair of the Australian Bankers' Association and the Australian Institute of Bankers, he is also chairman of Australian conglomerate Brambles Industries.

A successful board is one that gets at the issues, that takes account of the opinions of everyone around the table. Research shows, however, that despite their seniority and experience, about two-thirds of the world's top executives find it difficult to discuss sensitive issues. Argus uses his considerable experience to ensure that everyone contributes. He makes a point of going round the table, making the most of the individual board members' skill strengths, ascertaining everyone's position and getting full participation in the debate. Only then is he confident that he can give management the lead on whether the board supports the issue.

It is an approach that has contributed much to BHP Billiton's strong performance over the past five years, with the stock price rising to record highs in 2006 and production at highest ever levels.


Perhaps the most famous pronouncement from a chairman is the eagerly awaited annual Chairman's Letter from Warren Buffett, the media-styled Sage of Omaha and chairman of investment firm Berkshire Hathaway. Buffett is best known for presiding over an astonishing investment success story, producing an average annual return for his shareholders of 21% over 40 years and turning $1,000 invested in 1964 into over $7 million today. However, it is in his role as chairman that Buffett demonstrates a mastery of communication, befitting a world class chairman.

Berkshire Hathaway's corporate culture, its ethos of simplicity over complexity, humbleness over arrogance, is bound up with Buffett's reputation as a self-effacing man. Despite his stupendous wealth, he lives a modest life in the same house in Omaha that he bought for $31,500 in the 1950s; he drives an average car and works from a small office. This unassuming attitude is reflected in the homespun wisdom and homilies in his annual letters to the shareholders, or "partners and co-owners" as he prefers to call them.

Who else, after an unusually dismal company performance, would shoulder the blame by writing: "Relative results are what concern us. Over time, bad relative numbers will produce unsatisfactory absolute results. Even Inspector Clouseau could find last year's guilty party: your chairman."


David Clarke, chairman of Macquarie Bank, based in Australia, is one of the country's most experienced boardroom operators. Clarke has occupied the chairman's seat in both an executive and non-executive capacity since 1985, and is also chairman of McGuigan Simeon Wines and property company Macquarie Goodman Group.

Stories abound of strong-minded CEOs imposing their will on boards, which subsequently end up rubber-stamping the CEO's every whim. But not on Clarke's watch: he insists on a thorough examination of management proposals, often revising submissions in the process, and by doing so strengthens the board's commitment to the agreed course of action.

Clarity of project submission and resubmission has paid dividends: Macquarie has been transformed from the Australian branch of London's Hill Samuel to global player in its market, with 7,000 employees in 23 countries, a portfolio of A$89 billion ($73 billion) and a year-on-year increase in earnings per share over the past decade.


There is little that can be said about Bill Gates that hasn't been said already. The world's richest man, the founder of Microsoft, the philanthropist: Gates is one of the most written about people on the planet. The chairman of Microsoft is also one of the most respected. In 2005, a survey of 600 global business 'influentials' in 65 countries, conducted by PR firm Burson-Marsteller with the Economist Intelligence Unit, listed Gates as the world's most admired leader.

Interestingly, the widespread admiration from the business community came at a time when Gates was no longer CEO of the software giant, a role he handed to Steve Ballmer in 2000, staying on as chairman and chief software architect. The accolade was, said Burson-Marsteller, a recognition of his ongoing stewardship of the company he founded, and his power to influence and strategically shape the organisation, rather than command. Gates deserves applause for the way he has eased his way into the background at Microsoft with consummate skill - more recently, relinquishing his role as chief software architect, although he will remain chairman for the foreseeable future.


Stephen Green is group chairman of HSBC Holdings, the world's second biggest bank. Green cut his management teeth at global management consultants McKinsey before joining HSBC in 1977. He became group CEO in 2003, stepping aside in 2006 to take up the position of group chairman.

A good antenna for future trends and a strong focus on ethics and sustainability mark Green out as an exceptional chairman. A member of the advisory council of the Institute of Business Ethics, and also an Anglican deacon, Green believes that companies need to build sustainable business models. He has supported company initiatives that range from spending over £30 million on making the company's buildings more environmentally efficient, to creating a Sustainability Leaders Fund. Green was also instrumental in a move to advise the bank's clients on how to deal with climate change.

Spotting and setting the agenda on issues that will impact on the company in the next few years is a vital part of the chairman's role. A forward-looking chairman sets the tone for the corporate culture. As Green noted in a recent speech: "Nurturing a company's personality, its values and ethics, is not an exact science; it can't be represented in figures on the profit-and-loss account. But it is no less important for that. It is nothing less than an essential leadership task of boards and top management."


Franz Humer is chief executive and chairman of Swiss-based pharmaceuticals giant Roche, which employs 68,000 people worldwide and sells its products in 150 countries. Quietly charismatic, Humer is famed inside the healthcare company for his ability to communicate and champion the organisation's mission, values and strategy. He is the company's chief cheerleader and its most ardent critic. In the best-selling book Why Should Anyone be Led By You? (2006), authors Rob Goffee and Gareth Jones relate how Humer has demonstrated an ability all world-class chairmen should possess - a sensitivity to the needs of your audience at any given time.

When Humer filled the top spot, Roche was struggling: market share was falling, there was the fallout from an ongoing vitamin price-fixing scandal, a dwindling drug pipeline, plus continuing talks of a bid by rival Novartis. In light of the bad news, Humer saw part of his role as shoring up the top team's and general corporate morale, and reinforcing the message that the business was fundamentally strong.

Now that the company's prospects are much brighter, Humer's communication role has changed to acting as a brake on unbridled optimism. "Now I must remind my colleagues that we are not as good as we think we are," he says.


Like all world-class chairmen, Sir Mark Moody-Stuart knows his place, and is acutely aware of the demarcation of roles at board level. The best chairmen attend to their role out of the limelight, for the most part, and that is exactly what Moody-Stuart has done, first at Royal Dutch/Shell, where he served as chairman from 1998 to 2001, and where he spent most of his working life, and then at Anglo American, the natural resources and mining company, where he was appointed non-executive chairman in 2002. "It's quite right that they don't get much publicity because it's the CEO's job to be in the front line," he says.

Away from the spotlight, Moody-Stuart's quiet, unassuming approach has paid dividends. He steered the board through a major strategic review in 2005 and, more recently, oversaw the appointment of the company's first female chief executive, Cynthia Carroll. Shareholders have benefited from a 39% dividend increase in 2005 and 20% gains in 2006.


Infosys, the IT consulting and outsourcing company founded in 1981 by Narayana Murthy and six other software entrepreneurs, is one of a new wave of Indian companies making a big impact on the global business world. Murthy served as CEO at the company for 20 years, before stepping aside and allowing co-founder Nandan Nilekani to take over the helm.

After a period of four years as executive chairman and chief mentor, from 2002 to 2006, Murthy set an example of good governance, abiding by the company's retirement rules and standing down as executive chairman at 60 to assume the role of non-executive chair. This last point may seem unremarkable. But in a country where business leaders are often criticised for treating the companies they run as personal fiefdoms, with little regard for the rules and regulations, Murthy's decision to hand over the reins is exemplary.

In keeping with his own actions and sense of good governance, the company was one of the first in India to incorporate a code of corporate transparency. Murthy has also put in place regulations at Infosys that prevent the founders' family members from taking over the company.


One of the UK's most experienced chairmen, Sir John Parker, is currently chairman of National Grid, and has a host of senior board positions under his belt. In a career that spans engineering, energy and shipping, previous positions include chairman roles at engineering company Babcock, components business Firth Rixson, P&O and building products company RMC. Asked what qualified someone for the role of chairman, Parker replied: "Experience, a natural disposition, but crucially having been a non-executive director of the board that invites you to take the chair."

But while Parker has all the experience you need to be a great chairman, he is well aware that it is becoming more difficult to get that all-important experience, just as it is becoming more difficult to find the right talent for the top jobs. That's why he sets an example to other chairmen. Although an informal global network of board members provides one route into the boardroom for rising talent, Parker goes further. He makes sure that when he or his board members spot potential managers, they place them as non-executives on the boards of other companies. It is a smart move, benefiting National Grid and creating a new generation of board directors at the same time.


It is the job of a good chairman to deal not just with the issues of today, but also to anticipate the big debates of tomorrow. Lord Stevenson, chairman of HBOS, the largest mortgage and savings provider in the UK, and former chairman of Pearson, the largest educational publisher in the world, was an early advocate of taking a clear line on issues such as corporate social responsibility (CSR).

He applies the same intellectual rigour to CSR as any other business activity. In his chairman's role at Pearson and HBOS, Stevenson has pursued a CSR policy that demands a clear logic that it supports the interests of the business and therefore the stakeholders. As he explains: "Insofar as you spend any of your profits doing things in the community, CSR involves having a clear, explicit strategy for doing it - and a very disciplined one."

In keeping with this philosophy, during Stevenson's tenure at Pearson, 99% of the funds targeted at the community were spent on educational projects; at HBOS, the money is used to support financial literacy.


Group chairman Ratan Tata is charged with looking after the second largest company on the sub-continent. Already well-established in India, now the group, under the stewardship of chairman Tata, is exporting its brand around the world. The group recently bought Anglo-Dutch conglomerate Corus Group, one of a string of global acquisitions that include Daewoo's truck division and Tetley Tea.

Despite the family connections, Tata has set an example by working his way up the Tata Group ladder, first at the blast furnaces of Tata Steel and later at Tata Motors, Tata Consultancy Services and Tata Industries. Soon after his appointment as group chairman in 1999, he sent a clear message to the rest of the company by clearing out the old guard and bringing in a cadre of younger managers.

Tata has ensured that the unique character and culture of the Tata Group, one of the most valued and progressive companies in India, is preserved as it expands across the globe. In the spirit of a company that introduced the eight-hour working day, maternity leave, and profit-sharing for employees well before many of its Western counterparts, Tata staunchly defends its unique ownership structure and humanitarian tradition - where the majority of shares are held in foundations dedicated to improving the quality of life in India.


Lorenzo H Zambrano, CEO and chairman of cement giant Cemex, based in Mexico, is acutely aware of the need to achieve expansion while preserving the sense of the organisation's purpose and its identity.

"If a company is too Mexican, or too American, or too Korean, it may fail to take full advantage of the opportunities of globalisation. But if a company loses its roots, then it risks losing the values and ethics on which its culture and its success are built," he observes. "I believe that we will succeed only if we sustain and develop our culture in ways that preserve our values -even as we become larger, more global and more successful." Zambrano was instrumental in drawing up the Cemex way, a universal corporate-wide process to help guide the globalisation of the business.

Zambrano focuses on nurturing talent and providing access to the workings of the board. "Each year, we take 35 high-potential young leaders from throughout the company and design a tailor-made development programme. Most importantly, each participant is mentored by a member of our executive committee and me. This not only helps us to identify and promote superior talent, but creates an internal dialogue between top management and the company's future leaders," he says.

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