Article by John Willman, The Financial Times 30 Sep 2008
An outstanding chairman is someone who is never afraid to ask what might appear to be a silly question. He - and it is usually a "he" - is quite happy to enjoy his executives being triumphant without ever being in the limelight himself. He is a co-ordinator and a facilitator, but never the fount of all knowledge.
All good advice, from three chairmen past and present judged outstanding in a recent survey of directors with first-hand board experience. The first was from Sir Harry Solomon, former chairman of Hillsdown Holdings, the food group taken private in 1999; Sir Rob Margetts who currently chairs Legal & General, the insurance group, provided the second; the third came from Jeremy Hamer who chairs two Aim-listed companies, Access Intelligence and Glisten.
The survey, of 430 directors serving on more than 900 boards, is published today by Directorbank, a UK specialist recruitment business that finds executive and non-executive directors for the private equity sector. The directors nominated 132 chairmen they had worked with and rated outstanding altogether, with nine named more than once.
The resulting study helps fill some of the gaps in the management literature where there are volumes on what makes a good chief executive but much less about the chairman's role, which tends to be hidden from the sight of researchers in the boardroom.
"A lot of our work is with chairmen and we can see their impact on their companies' fortunes," says Elizabeth Jackson, chief executive of Directorbank. "It was a natural step to try to understand what can be learned from outstanding chairmen to pass on the findings to those coming new to the role."
The qualities the directors identified in an outstanding chairman included charisma, patience, ability to listen and mentoring skills. Business experience was also rated as important - especially having weathered storms before and the ability to manage a boardroom of potentially competing priorities.
Other sought-after qualities included having a good network of contacts and a willingness to take risks. The most important factors were the ability to run an effective board and to manage relationships with shareholders and stakeholders.
Those who dithered, failed to listen, had poor understanding of the sector or exerted poor control over the board came in for sharp criticism. And while most directors said they had worked with a director they considered outstanding, more than three-quarters said they had worked with an ineffective chairman.
One said of an underperforming chairman he was "only there for the title and money - abandoned management at the first sign of trouble". Another that the chairman "drove through his own agenda regardless of risk to the company and objective opinion". A third said: "Public school/Oxbridge education, totally into networking and nothing much else. Did not like to get his hands dirty."
Most thought there was nothing that could be done to improve underperforming chairmen, and the best solution was to remove them. But 40 per cent said their organisations had no mechanism to remove a failing chairman.
"There should always be a structure in place to remove the chairman, simply because from time to time things happen and people need to be removed," said one director. "It may be rare but it is a fact of life."
Almost all the directors said a board worked effectively only if the chairman and chief executive roles were held by separate individuals - an opinion shared by the chairmen interviewed for the study.
There were also strong views about the dangers of a chief executive stepping up to become chairman of the same company - opposed by 58 per cent of the directors. One said there would be too much baggage, another that they would be too concerned to defend their past record.
Many of the survey's findings were backed by the chairmen named by the directors as outstanding performers.
BA's Lord Marshall, chief executive before becoming chairman of the airline, says he would now come down marginally against making such a transition in the same company. He recognises that at times he has consciously not intervened to give the newcomer "space", when with hindsight he should have done.
"I certainly found myself biting my tongue. I'd been CEO for 13 years and a lot of staff continued to look to me as the leader."
Steve Norris, Jarvis chairman, says moving from chief executive to chairman could be dangerous, especially in private companies. "I can't tell you the number of people I know who decided they would like to take a 'back seat' - that's the expression they use - and hired someone to be chief executive, but actually can never give up driving, and when that happens, that's just lethal; lethal for them and lethal for the business."
Some of the directors doubted whether the chief executive role was good preparation for chairing the board, which required a "completely different mindset" to be successful.
"There are a lot of very good chief executives who do make outstanding chairmen," says Sir Rob Margetts of Legal & General. "But unquestionably, chief executive-type behaviours, which tend to be control-type behaviours, are not the characteristics you need in a chairman."
"Or put the other way round, a chairman who has those characteristics and hasn't actually modified them is unlikely to get on very well with his chief executive . . . "
The biggest challenge of the chairman's role was to remove the chief executive, the study found. Others were market downturns, turning around failing businesses, dealing with bad press and managing large-scale crises.
The majority of directors felt that while the chairman should maintain independence in the event of hostility, he or she should get personally involved in times of business crisis rather than remaining aloof.
One big gap identified by the survey was the shortage of women chairing UK boards - only one of the nominated 132 outstanding chairs was female. Nigel Whittaker, the former B&Q chairman who was also named as an outstanding chair in the survey, sees the shortage of women in the boardroom as a weakness for UK companies.
"If you haven't got women on the board then you haven't got a proper mix of the talent that is available in the world today," he says.
Ms Jackson of Directorbank says the problem is the shortage of women in senior executive roles, but that the number is now increasing. "I would expect to see more women chairing companies in five years."
The report can be downloaded from www.directorbank.com
'A radar for the top team': how to keep managers in the picture.
Allan Leighton, chairman of Royal Mail, has been on more than a dozen boards and chaired several of them. One of nine directors named more than once as outstanding in Directorbank's survey, he says the best chairmen help the executive team see the wood for the trees.
"I try to be radar for the top team. You don't have to be distant - find out what's happening and feed that back to the executive team."
The most important task for the chairman is to make sure the company has a great chief executive, he says. "In the end, it is the CEO who must run the company day to day. But you can help him or her put together a great executive team."
Mr Leighton says he learnt how to chair a board by watching how other chairmen operate - when he was chief executive of Asda before it was taken over by Wal-Mart, and as a non-executive director of companies such as British Sky Broadcasting, Selfridges, George Weston and Loblaws.
"You have to be aware of the governance stuff," he says, "but that is only part of it. You must talk to people and stay close to the action."
"In the end, the chairman is the leader of the board. If the chief executive isn't doing the business and you don't have confidence in him, you have to make the change."
Top men at the top
Nine British chairmen were nominated as outstanding by more than one director:
* Sir Dominic Cadbury, former chairman, Cadbury Schweppes
* Jon Foulds, former chairman, Huntsworth
* Ronnie Frost, former chairman, Hays
* Ian Irvine, former chairman, Reed Elsevier
* Eric Kinder, former chairman, Smith & Nephew
* Allan Leighton, chairman, Royal Mail
* Sir Rob Margetts, chairman, Legal & General Group
* Lord Marshall, former chairman, British Airways
* Sir Peter Thompson, chairman, Phoenix Asset Management
Source: Directorbank
Copyright The Financial Times Limited 2008
