Chairman and chief executive officer (CEO): that sacred and secret relationship

Abstract

Abstract:The attention given to corporate governance has engendered little inquiry into one critical aspect of boardroom dynamics -the Chairman/CEO relationship. The reasons for the lack of attention to the Chairman/CEO dyad are highlighted, as well as the board and organisational performance reasons for maintaining role separation or entering into duality. Due to the poverty of understanding the effect of the Chairman/CEO relationship, a qualitative study was undertaken from which four themes emergedChairman's role and contribution, nature of the Chair/CEO relationship, impact of the Chair/CEO relationship on board effectiveness, and the attributes of an effective Chairman. It is concluded that formative context is a determining factor in the development of this fundamental relationship which, in turn, has a profound impact on boardroom effectiveness.

Chairman of the board: demographics effects on role pursuit

“…Even studies of 40 years ago (Hodgson et al, 1965) observed the "complementarity of functions" between chairman and CEO, with Stewart (1991) stating that the chairman role and executive director's role within the context of the UK's health services, are mutually inter-dependent. Kakabadse et al (2006), in their recent study of CEO/chair interrelations, reveal that the chair/CEO complementarity resembles a "generative dance" of constant attention to changes of mood and circumstance and, above all, the observable display of trust and respect for the other.…”

“…In order to maintain the spirit of role separation, an emerging UK based trend is to recruit the chairman from existing non executive positions and not migrate the CEO to the position of chairman (Kakabadse et al, 2006). In fact, Higgs (2003, p. 81) specifically suggested that the "chief executive should not go on to become chairman of the same company" (Table II).…”

“…With the recognition that an unrestrained CEO and his/her team were a prime root of corporate excess, the role of chairman in UK and Australian companies was elevated to the role of the "keeper of the board" and also the "minder of the CEO" (Kakabadse et al, 2006). The monitoring of management by the non executive directors (NEDs) and the holding of the CEO accountable by the chairman allowed boards to gain a greater role in strategy formulation, providing independent judgement on senior executive appointments and determining performance related rewards.…”

“…Thus, two counter balancing pressures are prevalent on the board of the Anglo-American enterprise, the realising of profit for shareholders involving the exercising of governance disciplines for the protection of shareholder rights, and the nurturing of a proactive business culture for the purpose of financial and reputational gain. The juggling of interests to achieve both ends falls on the shoulders of the chairman of the board, a position that has reached public prominence as much due to the popular emergence of corporate governance (Hanson and Song, 2000;Kakabadse et al, 2006).…”

Development of trust in the CEO-chair relationship

“…A working relationship between the CEO and Chair of the Board has been proposed as necessary for effective governance and pivotal to the performance of the Board (Roberts, 2002;Kakabadse et al, 2006), and to be at the heart of many other key organisational relationships (Roberts and Stiles, 1999). Trust, too, has been increasingly recognised as a central mechanism within organisational relations and governance, and the significance of trust has been highlighted in the literature of the CEO-Chair relationship (e.g.…”