The Chairman of the Board is Primus Inter Pares (the first among equals or first among peers) on the Board of Directors of every company and typically elected by members of the Board of Directors who also determine the period for which he/she is to hold office. In other jurisdictions, the Chairman of the Board is elected annually by members of the Board at the first Board meeting after each Annual General Meeting or between Annual General Meetings upon the resignation, death, disqualification or removal of an incumbent Chairman. The Chairman should be a non-executive director and it is desirable that he/she should satisfy any independence standards set by the Board, applicable law or relevant Corporate Governance Code and best practice.
The return of the former CEOs of two Nigerian Banks as Chairmen of the respective Banks, raises the question of independence and overbearing influence – particularly in the context of them being substantial shareholders. To neutralize their influence in the interest of all stakeholders, it is recommended that additional Independent Directors (who pass the test in every material respect) be appointed on the Board of these institutions.
Selecting a Board Chair is a very important process in the life of any company. Most organizations adopt the democratic approach spelt out in the Companies and Allied Matters Act by voting for one of them to serve as Chair. In appointing a Chairman, it is important to ensure that the individual possesses a good understanding of the company’s business to be able to properly conduct Board meetings and provide oversight to the Chief Executive Officer. The Chairman must also be a unifying presence with the ability to guide the Board to a consensus in decision making. An effective Chairman should have a good working relationship with the CEO, and enjoy the respect of other Board members. The effectiveness of a Board is dependent largely on the Chairman’s industry knowledge, leadership skills and influence on Board processes.
The Chairman is accountable to and serves at the pleasure of the Board. He/she provides overall leadership and direction to the Board and the Company; sets the strategic and annual Board plan; chairs Board and General meetings; communicates with shareholders and core investors. The Chairman also oversees Director nomination, appointment, development and performance evaluation.
Although the Chairman acts as a direct liaison between the Board and Management through the CEO, he should possess the skills to carry out the function of providing proper oversight and guidance without micro-managing or getting involved in the day-to-day operations of the company. The concept of the separation of the role of the Chairman from that of the CEO implies that the Chairman should be independent of Management and free from any business interest or other relationships which could interfere with his ability to make independent judgment.
To be an effective leader, the Chairman must be trusted and respected by the other members of the Board and by Management as well as shareholders. To gain the trust of his peers, the Chairman should be fair, open minded and encourage Board members to voice their views without compromising the need to run meetings efficiently. Suffice it to say that the effectiveness of a Board of Directors is severely limited if meetings are conducted by the Chairman in a way that stifles expression of divergent views.
Above all, the Chairman must be a person of integrity, uphold high ethical values and have the strength of character to truly be the first among equals.