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 — not the most senior employee, which is the CEO’s role, but the most senior governance figure. The chairman leads the board, chairs its meetings, manages the board’s relationship with the CEO and represents the company’s governance to its major shareholders. Getting the chairman role right is one of the most consequential governance decisions a company makes — a strong chairman creates the conditions for effective board governance; a weak or poorly chosen one allows management to dominate the board or, alternatively, allows an overly interventionist governance approach to constrain management’s ability to operate effectively.

This guide explains what a company chairman does in practice — covering their core responsibilities, their relationship with the CEO and the board, what the FRC UK Corporate Governance Code requires of the chairman role and what distinguishes an effective chairman from an ineffective one.

The Chairman’s Legal and Governance Position

The chairman is a company director with the same legal duties as any other director under the Companies Act 2006 — the duty to act within the company’s constitution, to promote the success of the company, to exercise independent judgement and to avoid conflicts of interest. These duties apply to the chairman in exactly the same way as they apply to every other board member.

What distinguishes the chairman from other directors is not a different legal position but a different governance function and, typically, a different source of authority. The chairman is usually appointed by the board — elected by the directors from among themselves — rather than separately elected by shareholders. This means the chairman’s authority derives from the confidence of the board, which also means the board can remove the chairman if that confidence is lost, even if shareholders have no direct mechanism to do so.

The FRC UK Corporate Governance Code places specific responsibilities on the chairman. The Code states: “The chair leads the board and is responsible for its overall effectiveness in directing the company. The chair should demonstrate ethical leadership and promote good governance culture.” The Code also requires that the chairman should be independent on appointment — free from the relationships with management or shareholders that would compromise their ability to lead the board independently — and should not be the same person as the CEO.

Leading the Board

The chairman’s primary function is leading the board of directors — ensuring that the board operates as an effective collective governance body rather than as a collection of individually capable directors who happen to attend the same meetings.

Chairing board meetings. The chairman chairs each board meeting — setting the agenda, managing the discussion, ensuring that all directors have the opportunity to contribute and that no single voice dominates, driving the board to decisions when decisions are required and maintaining the distinction between governance deliberation and management reporting. A well-chaired board meeting is substantive, focused and produces clear conclusions; a poorly chaired one drifts between operational updates and loses governance purpose.

Setting the agenda. The chairman, working with the CEO and company secretary, sets the board meeting agenda. The agenda is a governance document — it determines what the board spends its time on and therefore what governance authority it exercises. A chairman who allows the agenda to be dominated by management reporting and operational updates at the expense of strategic discussion and risk governance is failing the board leadership function. The agenda should be structured to give the most important governance matters the most board time, not to provide management with the most comprehensive forum for reporting.

Board culture and tone. The FRC Code’s emphasis on the chairman demonstrating “ethical leadership and promoting good governance culture” reflects the chairman’s role in setting the standard for how the board operates. The board’s willingness to challenge management, its respect for independent opinion and its commitment to substantive governance rather than governance performance all reflect the culture the chairman establishes. This is not a formal governance function — it is a leadership quality that cannot be codified but is consistently identifiable in the difference between effective and ineffective boards.

The Chairman-CEO Relationship

The most important bilateral relationship in a company’s governance is the relationship between the chairman and the CEO. Getting this relationship right — maintaining the governance distinction between board leadership and executive management while building the mutual trust and respect that makes the relationship productive — is the central challenge of the chairman role.

The chairman’s role in relation to the CEO has three primary dimensions. First, the chairman is the CEO’s primary governance accountability mechanism — the person to whom the CEO reports at board level, who provides direct feedback on the CEO’s leadership and performance and who leads the board’s formal assessment of the CEO. Second, the chairman is the CEO’s principal board-level sounding board — the person the CEO can discuss strategic questions and governance challenges with outside the formal board context. Third, the chairman is the person who, if the CEO’s performance is inadequate or their relationship with the board has broken down, leads the governance process through which the CEO is replaced.

The FRC Code’s requirement for separation of the chairman and CEO roles reflects the governance principle that the person who leads the board’s oversight of management cannot also be the head of management. A combined chair-CEO role concentrates authority in a single individual without the governance checks that the separation principle creates. See our CEO vs Chairman: Who Really Holds the Power? guide for a detailed analysis of the authority dynamic between these roles.

Board Composition and the Nomination Committee

The chairman typically chairs or plays a central role in the nomination committee — the board committee responsible for reviewing the board’s composition, identifying gaps in skills and experience and leading the appointment process for new directors. This is one of the chairman’s most consequential governance functions: the quality of the board the chairman helps build determines the quality of governance the company can produce for years to come.

The chairman’s role in board composition includes: conducting or commissioning a skills and experience audit of the current board to identify composition gaps; defining the profile for new director appointments when gaps are identified or vacancies arise; leading or overseeing the appointment process for new NEDs and executive directors; managing the induction of newly appointed directors to ensure they are effective from their first board meeting; and overseeing the board’s annual effectiveness review, which should include an assessment of whether the board’s composition continues to serve the company’s strategic needs.

The FRC Code specifically provides that the chairman should not chair the nomination committee when it is dealing with the appointment of a successor to the chair — reflecting the governance principle that the person whose replacement is being planned should not control the process that selects their successor.

Shareholder and Stakeholder Engagement

The chairman is the primary governance point of contact between the board and the company’s major shareholders. While the CEO and CFO engage with investors on operational and financial performance through the investor relations programme, the chairman engages with major institutional shareholders on governance matters — board composition, executive remuneration, the company’s governance approach and any concerns that shareholders have raised about the board’s independence or effectiveness.

This shareholder engagement function has become increasingly important as institutional shareholders have become more active in exercising governance expectations. Major institutional investors — pension funds, asset managers, sovereign wealth funds — now engage directly with the boards of the companies they invest in on governance matters, and the chairman’s ability to represent the board’s governance credibly in these conversations is a significant practical requirement of the role.

The chairman’s stakeholder engagement extends beyond shareholders. The FRC Code’s broader stakeholder accountability provisions — the duty to have regard to employees, customers, suppliers and communities under Section 172 of the Companies Act — give the chairman a governance responsibility for how the board engages with stakeholders beyond shareholders. Many larger companies have established formal mechanisms for workforce engagement at board level — a designated NED for workforce engagement, employee advisory panels or direct workforce reporting to the board — and the chairman’s oversight of these mechanisms is part of the governance role.

Board Effectiveness and Evaluation

The FRC Code requires the board to undertake a formal and rigorous annual evaluation of its own performance. The chairman leads this evaluation — either internally or, for FTSE 350 companies, through an externally facilitated process at least every three years. The board evaluation covers: the performance of the board as a whole; the performance of each board committee; the performance of the chair; and the performance of each individual director.

The chairman’s personal performance is evaluated separately from the overall board evaluation — typically by the Senior Independent Director (SID), who gathers the views of the other board members on the chairman’s effectiveness. This is one of the governance mechanisms that ensures the chairman themselves is accountable to the board rather than above it.

A well-conducted board evaluation produces an honest assessment of the board’s governance quality and an action plan for improvement. A poorly conducted evaluation — particularly one that the chairman designs to produce a comfortable conclusion rather than an honest assessment — provides governance performance without governance substance.

The Chairman’s Role in CEO Succession

One of the chairman’s most important long-term governance responsibilities is overseeing CEO succession planning. The board should always have a credible plan for replacing the CEO — both for planned succession (when the current CEO’s tenure is approaching its natural end) and for emergency succession (when the CEO departs unexpectedly through illness, resignation or termination).

The chairman leads the nomination committee’s work on CEO succession — ensuring that internal candidates are identified and developed, that the board has a clear view of the internal pipeline and that, where external candidates are required, the market has been appropriately assessed. The chairman also typically leads the search for a new CEO when the time comes — briefing the executive search firm, overseeing the candidate assessment process and managing the board’s deliberations on the appointment.

Boards that have not invested in succession planning — where the CEO’s departure, however caused, leaves the board scrambling to identify a replacement — are governance failures in waiting. The chairman who maintains the CEO succession plan as a live governance priority rather than a theoretical compliance exercise is providing one of the most valuable long-term governance services the board can offer.

Executive vs Non-Executive Chairman

The distinction between an executive chairman and a non-executive chairman reflects whether the chairman also holds management responsibilities in the company.

A non-executive chairman — the standard in UK listed company governance — holds no management role and is entirely focused on the board leadership function. They are independent (on appointment at minimum) and their time commitment to the company is confined to governance — board meetings, committee oversight, shareholder engagement and CEO relationship management. Most UK companies that separate the chair and CEO roles have a non-executive chairman.

An executive chairman combines the board leadership role with operational management responsibilities. This is most common in founder-led businesses where the founder serves as chairman while an external CEO manages day-to-day operations — but the founder retains significant operational involvement. The executive chairman role is explicitly discouraged for premium listed companies by the FRC Code’s independence provisions. In private companies, the executive chairman is a legitimate governance structure, particularly in the early stages of professional governance development.

Chairman Remuneration

The chairman’s remuneration reflects the seniority of the role and typically exceeds the standard NED fee. Listed company chairmen receive an annual fee set by the remuneration committee — the chairman cannot participate in the remuneration committee’s determination of their own fee, reflecting the same conflict-of-interest principle that prevents executive directors from setting their own pay.

Current UK market benchmarks for chairman remuneration: FTSE 100 chairmen £350,000–£600,000 per annum; FTSE 250 chairmen £150,000–£300,000; AIM and smaller listed companies £50,000–£150,000. Private company chairmen at comparable scale to smaller listed companies: £40,000–£100,000 per annum. PE-backed company chairs: £40,000–£100,000 per annum cash fee with equity participation. Chairmen typically do not participate in the executive bonus scheme or long-term incentive plans — their remuneration is a fixed fee reflecting the time commitment and governance responsibility of the role.

What Makes an Effective Chairman

The qualities that distinguish an effective chairman from an ineffective one are partly formal — the right governance experience, the right sector knowledge — and partly personal qualities that no governance code can mandate.

Prior board governance experience. The effective chairman has served as a senior NED or as a chairman on a previous board. The governance challenges of the chairman role — managing the CEO relationship, leading an effective board evaluation, chairing the nomination committee through a difficult director appointment process — are best navigated by someone who has observed or experienced them previously.

Genuine independence. Independent on appointment and committed to maintaining that independence throughout the mandate. A chairman who is captured by management — who consistently supports management’s position against the board’s independent judgement — is not providing governance. A chairman who has been in post for many years may face independence challenges as relationships deepen; the nine-year tenure provision in the FRC Code reflects awareness of this risk.

Interpersonal authority. The ability to chair a board meeting with genuine authority — managing strong personalities, drawing out quieter voices, preventing dominant individuals from monopolising discussion and driving the board to conclusions when conclusions are needed. This is a leadership quality more than a governance one, but it is the most practically important quality in a functioning board context.

Strategic understanding. Sufficient understanding of the company’s sector, competitive environment and strategic challenges to engage credibly with the CEO on strategic questions and to chair informed board discussions about the company’s direction. A chairman who does not understand the strategic context well enough to ask the right questions cannot lead effective strategic governance.

Related pages: Chairman of the Board Recruitment  |  Non-Executive Chair Recruitment  |  CEO vs Chairman  |  The Role of a PE Chair  |  NED Knowledge Centre

NED Capital recruits chairmen and non-executive chairs for boards across the UK. Call 0203 137 2496 or see our Chairman Recruitment page to discuss a chairman appointment.