What Does A Company Chairman Do ?

NED Capital Knowledge Centre  |  Adrian Lawrence FCA, Founder

The company chairman is the most senior member of the board of directors. The chairman is not the most senior employee, which is the chief executive’s role, but the most senior governance figure. The chairman leads the board, chairs its meetings, manages its relationship with the chief executive and represents the board to the company’s shareholders. Choosing the right chairman is one of the most consequential governance decisions a company makes. A strong chairman creates the conditions for an effective board; a weak one allows management to dominate the board, or allows the board to intrude on management so far that the executive team cannot do its job.

This guide explains what a company chairman does in practice: the legal position, the core responsibilities, the relationship with the chief executive, what the UK Corporate Governance Code expects of the chair, the time the role demands and how chairs are recruited. Many organisations now use the term “chair” rather than “chairman”, and this guide uses the two interchangeably.

The Chairman’s Legal and Governance Position

The chairman is a company director with the same legal duties as every other director under the Companies Act 2006. These include the duty to act within the company’s constitution, the duty under section 172 to promote the success of the company for the benefit of its members as a whole, the duty under section 173 to exercise independent judgement, and the duties to avoid conflicts of interest and to exercise reasonable care, skill and diligence.

What distinguishes the chairman is not a different legal status but a different function. The chairman is usually appointed by the board from among its members, under the company’s articles of association, rather than elected separately by shareholders. The chairman’s authority therefore rests on the confidence of the board, and the board can generally replace its chairman if that confidence is lost. In most companies the chairman also has a casting vote at board meetings if the articles provide for one, although a well-run board rarely needs it.

The difference between executive and non-executive directors matters here. In most UK listed companies, and increasingly in larger private and PE-backed businesses, the chairman is a non-executive. Our guide to the difference between an independent and a non-executive director explains how these categories overlap.

What the UK Corporate Governance Code Expects of the Chair

For companies that apply it, the UK Corporate Governance Code sets out the clearest statement of what a chair is expected to do. The Code works on a “comply or explain” basis, so companies either follow its provisions or explain in their annual report why they have not. The key expectations of the chair are these.

Leadership of the board. The Code’s principles make the chair responsible for leading the board and for its overall effectiveness in directing the company. The chair is expected to show objective judgement throughout their tenure, promote a culture of openness and debate, and make sure that directors receive accurate, timely and clear information.

Independence on appointment. The chair should be independent on appointment, assessed against the same circumstances that the Code uses to judge the independence of non-executive directors, such as recent employment by the company, material business relationships or close family ties with its advisers, directors or senior employees.

Separation from the chief executive. The roles of chair and chief executive should not be exercised by the same individual. A chief executive should not go on to become chair of the same company. If, exceptionally, a board decides that this is right, it should consult major shareholders in advance and explain its reasons.

Tenure. The chair should not remain in post beyond nine years from the date of their first appointment to the board. The period can be extended for a limited time to support succession planning and the development of a diverse board, particularly where the chair was an existing non-executive director on appointment, with a clear explanation to shareholders.

Committee roles. The chair should not be a member of the audit committee. The chair can sit on the remuneration committee if they were independent on appointment, but should not chair it. The chair often chairs the nomination committee, but should not do so when the committee is dealing with the appointment of the chair’s own successor.

Board evaluation. The chair is expected to act on the results of the board’s performance evaluation, and the Code expects FTSE 350 companies to have an externally facilitated board evaluation at least every three years. The chair’s own performance is appraised by the non-executive directors, led by the senior independent director.

Companies on AIM usually apply the QCA Corporate Governance Code, which also places the chair at the centre of board leadership and governance. Charities have their own framework in the Charity Governance Code, which sets out the chair’s role in leading the trustee board. Our article on how the UK Corporate Governance Code affects non-executive directors covers the wider Code.

Leading the Board

The chairman’s primary function is to make the board work as an effective collective body rather than a group of individually capable people who happen to attend the same meetings.

Setting the agenda. The chairman, working with the chief executive and the company secretary, sets the board agenda. The agenda decides what the board spends its time on, and therefore what it governs. A board whose time is dominated by operational updates at the expense of strategy, risk and people is not being led well. Our guide to what good board papers look like explains the information side of this.

Chairing meetings. The chairman runs each meeting: making sure every director can contribute, preventing any single voice from dominating, distinguishing discussion from decision and bringing the board to a clear conclusion when a decision is needed. Our guide to how to run an effective board meeting covers the practical techniques.

Board culture. The chairman sets the tone for how the board behaves: its willingness to challenge, its respect for independent views and its commitment to substantive debate. Culture cannot be written into a terms of reference, but the difference between a board that challenges well and one that does not is usually visible in the way the chair runs it. Our article on creating constructive tension in the boardroom explores this further.

Developing directors. The chairman is responsible for making sure that new directors receive a proper induction and that all directors keep their skills and knowledge up to date. Our board induction guide sets out what a good induction covers.

The Chairman and the Chief Executive

The relationship between the chairman and the chief executive is the most important working relationship in a company’s governance. The chairman leads the board; the chief executive leads the business. Getting the balance right means maintaining a clear distinction between the two roles while building enough trust for the relationship to be genuinely useful.

The chairman plays three parts in this relationship. First, the chairman holds the chief executive to account on behalf of the board, giving direct feedback and leading the board’s assessment of the chief executive’s performance. Second, the chairman is a sounding board, someone with whom the chief executive can test ideas and difficult decisions outside the formal board meeting. Third, if the chief executive’s performance falls short or their relationship with the board breaks down, the chairman leads the process for change.

The separation of the two roles exists because the person who leads the board’s oversight of management cannot credibly also lead management. Our articles CEO vs Chairman: Who Really Holds the Power? and who is the most powerful in the boardroom look at the balance of authority in more detail.

Board Composition and Succession

The chairman usually chairs, or plays a central part in, the nomination committee, which reviews the board’s composition and leads the appointment of new directors. The quality of the board the chairman helps to build decides the quality of governance the company will have for years afterwards.

In practice, the chairman’s work on composition includes reviewing the board’s skills and experience against the strategy, often using a board skills matrix; defining the profile for new appointments; overseeing the search and selection process; and making sure that succession plans exist for both the board and senior management. Our guide to what a nomination committee does explains the process, and our article on succession planning for NEDs covers the planning side.

Shareholders and Stakeholders

The chairman is the board’s main point of contact with major shareholders on governance matters. The chief executive and finance director engage with investors on performance and strategy; the chairman engages with them on board composition, remuneration, governance and any concerns about the board’s effectiveness. The chairman is expected to make sure that the board as a whole understands the views of major shareholders.

The chairman also plays a part in the board’s wider stakeholder responsibilities. Section 172 requires directors to have regard to employees, suppliers, customers, the community and the environment, and the chairman shapes how much attention the board gives to these interests in its decisions.

Independence on Appointment

Independence on appointment is one of the most important tests in a chair search. A candidate who has been an employee of the company in recent years, has a material business relationship with it, has close family ties with its directors or advisers, or represents a significant shareholder is unlikely to meet the test. The question is not only whether the candidate meets the technical criteria, but whether they will be seen by shareholders and the rest of the board as able to lead objectively.

Independence is assessed at the point of appointment. After that, the chair is expected to show objective judgement throughout their tenure rather than to be re-tested against the independence criteria each year. Our article on why independence matters more than ever explains the broader principle.

Time Commitment

The chairman’s role takes significantly more time than an ordinary non-executive appointment. Beyond board meetings, the chairman prepares agendas, meets the chief executive regularly, chairs the nomination committee, meets shareholders, leads the board evaluation and supports individual directors. In a crisis, a transaction or a period of leadership change, the demands rise sharply.

The UK Corporate Governance Code expects boards to take account of other demands on a director’s time when making appointments, and expects the chair’s other significant commitments to be disclosed before appointment and in the annual report. A chair candidate with too many existing roles is a risk, however strong their experience. Our NED salary guide explains how chair fees reflect the extra time commitment, and our article on how NED fees are structured covers the detail.

What Makes an Effective Chairman

The qualities that make a chairman effective are rarely the same as those that made them an effective executive. The best chairs listen more than they speak in meetings, draw out the views of quieter directors and resist the temptation to run the business from the boardroom. They are comfortable having difficult conversations with the chief executive in private, and supporting them in public. They understand governance well enough to apply it with judgement rather than as a checklist, and they keep the board focused on the decisions that matter most.

Ineffective chairs tend to fail in one of two directions. Some become too close to the chief executive and stop holding management to account. Others act as a shadow chief executive, second-guessing operational decisions and undermining the executive team. Both patterns are usually visible in a well-run independent board evaluation.

How Chairs Are Recruited

Chair appointments are usually led by the nomination committee, chaired in this case by the senior independent director or another independent non-executive rather than the outgoing chair. The process normally starts with a review of what the company will need from its chair over the next five years, followed by an agreed candidate profile, a search, interviews with the board and, for larger companies, consultation with major shareholders.

The strongest chair candidates are almost always serving chairs or experienced non-executives who are not actively looking for a new role. Reaching them takes direct approach and an established network rather than advertising. Our guide to how to appoint a board chair sets out the steps, and our chairman of the board recruitment and non-executive chair recruitment services explain how NED Capital runs these searches. For FCA-regulated firms, the chair of the board is the SMF9 senior manager function and needs regulatory approval; see our page on SMF9 chair appointments. Where a board needs cover while a permanent chair is found, our interim chairman service can help, and private equity investors will find our guide to the role of a PE chair useful.

Chair searches are run by our senior search team, each with at least ten years in senior-level recruitment, under founder Adrian Lawrence FCA. For a broader view of all board-level appointments, see our board recruitment page.

Frequently Asked Questions

Is the chairman an executive or a non-executive?
In most UK listed companies the chairman is a non-executive. Some private companies have an executive chairman, often a founder or major shareholder, but the UK Corporate Governance Code expects the chair to be independent on appointment and separate from the chief executive.

Can the chief executive become chairman?
The Code says a chief executive should not become chair of the same company. If a board decides it is right in exceptional circumstances, it should consult major shareholders in advance and explain its reasons.

How long can a chairman serve?
Under the Code, the chair should not remain in post beyond nine years from their first appointment to the board, with a limited extension possible to support succession.

Who appraises the chairman?
The non-executive directors, led by the senior independent director. See our guide to the senior independent director’s role.