What is a Chairperson in Corporate Governance?
A Chairperson is an executive elected by a company’s board of directors, responsible for presiding over board or committee meetings. They often set the agenda, have significant influence over board votes, and ensure meetings run smoothly and remain orderly. The Chairperson also works towards achieving a consensus in board decisions.
Key Takeaways
- A Chairperson is an executive elected by the board of directors responsible for presiding over board meetings.
- They set the agenda and significantly influence how the board votes.
- While the CEO runs the company, appointed by the board, the Chairperson can influence the selection of the CEO.
- Combining the roles of CEO and Chairperson can reduce transparency and accountability due to fewer checks and balances.
Understanding a Chairperson
The Chairperson heads up the board of directors for a company—a group of individuals elected to represent shareholders’ interests. The board’s mandate includes establishing policies for corporate management, making significant company decisions, and balancing management and shareholder interests.
Boards are tasked with decisions on corporate officer appointments, executive compensation, and dividend policy. Given such responsibilities, the Chairperson holds significant power in influencing board decisions. Despite this, the Chairperson typically doesn’t get involved with the CEO’s specific responsibilities to maintain role clarity and separation of powers.
Over time, as more women assume chair positions, titles like “Madame Chair” have been adopted to reflect this progression.
Chairperson vs. CEO
There is a distinct difference between the roles of Chairperson and CEO. While a Chairperson presides over meetings and influences the board’s agenda, the CEO has the ultimate responsibility for major corporate decisions, daily operations, and managing company resources.
The combined role of CEO and Chairperson can diminish transparency due to fewer checks and balances. Typically, the Chairperson supervises while the CEO executes daily and strategic management.
In smaller companies, CEOs might be more involved in day-to-day operations. In contrast, CEOs of larger firms like Fortune 500 companies focus on macro-level strategies and delegate lower-level tasks to division executives. While CEOs often gain public recognition, Chairpersons usually remain less conspicuous but hold substantial influence, especially in board decisions.
Examples of a Chairperson
- JP Morgan Chase & Co.: Combines both roles with Jamie Dimon as CEO and Chairperson.
- Apple Inc.: Separates the roles with Tim Cook as CEO and Arthur D. Levinson as Chairperson.
- Meta (formerly Facebook): Mark Zuckerberg acts as Founder, Chair, and CEO, showcasing common founder-led structure.
Often, founder-led companies combine the roles, though this may change due to financial performance or founders’ future aspirations.
Related Terms: CEO, Board of Directors, Shareholders, Executive Compensation.
References
- Internal Monetary Fund. “IMF Executive Board Selects Christine Lagarde as Managing Director”.
- JP Morgan Chase & Co. “Jamie Dimon”.
- Apple. “Leadership and Governance”.
- Calico. “Arthur D. Levinson”.
- Meta. “Our Leadership”.
