Corporate secretaries have the opportunity and obligation to be a trusted adviser.
A new, independent board chair means changes – for the company and its management, for the board, and for you as the corporate secretary. While an independent board chair is not a new phenomenon, only a minority of companies in the US utilize this structure. Only six Fortune 500 companies have an explicit policy separating the two positions.
Since relatively few companies in the US have committed to having an independent chair, the process of transition from one independent chair to another has not become routine. Thus, corporate secretaries must now navigate a host of new dynamics in helping the new chair seamlessly and successfully move into a leadership position while fostering the chair–management relationship. Every board is different, and each faces a unique set of challenges, but by addressing the issues below – many of which are about people as well as process – corporate secretaries can play a very positive part in establishing productive board dynamics.
1. Build a new relationship with the chair
Although the new chair will undoubtedly have been on the board, his or her role will change markedly. The chair is now responsible for making the board function well and ensuring it is appropriately implementing regulations and governance practices.
Corporate secretaries have the opportunity and the responsibility to become the chair’s trusted adviser, providing the intelligence and tools needed to take on new challenges and responsibilities. To do this, mutual trust and respect must be developed. Identify the objectives that the new chair wants to achieve, and become a partner in achieving them. Take time to understand the new chair’s concerns – often a difficult assignment if the chair does not articulate them clearly.
As the corporate secretary, you are the governance expert. If the law or regulations change, you must advise the chair and work with him or her to determine how to implement them. If new trends are optional, your job is to let the chair know about them and ensure that he or she understands the rationale behind them and whether they would benefit the company and the board. Use your diplomatic skills and be open to a new perspective – the key is to listen, not lecture. Do not make the mistake of the corporate secretary who lectured the new chairman, whom she thought she knew well, on ‘how things are done’ – meaning, how she and the previous chairman had done things. She was surprised to return from vacation and learn that she had been replaced.
2. Support the new chair–CEO relationship
The CEO and the new chair must develop their own working relationship. You may have dual reporting responsibilities, both to the CEO and to the chair, and this is where diplomatic skills come into play.
To start off on the right foot, work with both the chair and CEO to establish a protocol for situations that involve both of them. For example, what is the procedure and schedule for determining the board agenda? When the chair or other directors schedule agenda items, how will the CEO know in advance in order to be prepared? Getting these basic things established will help prevent unnecessary tension down the road.
Information provided to the board and the quality (or quantity) of management presentations to the board can be a contentious issue. It is important for the chair and CEO to understand that some procedures must change, and that a process for developing those changes exists. It may fall to you as the corporate secretary to interpret what the board wants for management and to coach your colleagues on how to fulfill those requests. Make sure the company’s internal communication procedures are understood by everyone concerned, and above all, stay out of any intramural politics.
3. Responding to changing board dynamics
Effective corporate governance involves far more than good practices and procedures. An effective board challenges and debates, but in a collegial atmosphere of mutual respect and trust.
The dynamics among board members will change with a new chair. Besides the new chair, there may be other changes in committee membership, and there may be new faces on the board. An important part of the chair’s job, particularly when he or she is new in the role, is to pull this group of independent directors together into a cooperative, constructive body.
In an ideal world, directors are candid with one another and there is healthy debate. In the real world, however, the typically polite setting of the boardroom can easily mask underlying tensions. Unspoken matters remain buried, and directors fail to coalesce as a collegial body.
The new chair may want your observations on the board’s dynamics, and you must be attentive to this aspect of the business. Particularly for a new chair, a thorough board assessment can be helpful. You cannot tell the new chair to commission a board assessment, but you can ask whether this might be a good time for the annual board evaluation to be more thorough than it may have been in the past.
An in-depth assessment will provide data to help the chair understand what’s really on directors’ minds. For example, at one company, neither the new chair nor the rest of the board understood the depth of bad feeling that had developed with respect to a couple of the firm’s directors. Surprised, but armed with the data from a board assessment, the chair led a reorganization of the board that included some directors not standing for re-election.
4. Be prepared to suggest and implement new practices
As you pull together the three strands discussed above, a rethinking and re-engineering of board practices may be in order. Keep abreast of what others are doing. You cannot dictate a change in practices, but you can report on new developments and trends that may meet your board’s particular needs. If there is a better way to meet a governance objective, you can suggest it and explain your reasoning.
Your success in providing governance advice depends in part on the relationship that you have with the chair, the chair–CEO relationship, the trust that the CEO has in you, and your understanding of the board’s dynamics. A new chair presents challenges, but it also provides the corporate secretary with opportunities to make a real difference in the success of the board and how it is perceived internally and externally.
A growing trend
Although few companies have official policies that mandate separation of the board chairman and CEO positions, publicly traded firms are slowly adopting the practice voluntarily.
According to the 2010 Spencer Stuart US Board Index report, ‘The gradual shift toward independent board leadership continues, with 40 percent of boards now splitting the CEO and chair roles, up from 23 percent a decade ago. And 19 percent of chairs are truly independent, versus just 9 percent in 2005. This percentage has risen every year since 2004, when we first started tracking it.’
