While the role of Chairman has become increasingly important as a result of the increasing pace, size and complexity of business activity globally, most directors only have a vague understanding of what the Chairman's job actually entails. From a legalistic perspective, the Nigerian Companies and Allied Matters Act provides a very narrow definition of the role and responsibilities of the Chairman of the Board. The Act simply provides that a Board of Directors may select one of their own to chair their meetings and the general meeting of the company. The Chairman will also have a casting vote, unless the Company's Articles of Association state otherwise. That's it. However, we can look to the Nigerian Code of Corporate Governance for a better understanding of what the Chairman's role entails.
The Nigerian Code of Corporate Governance sets out principles which public companies and regulated private companies must adhere to, and requires the Chairmen of these companies to provide " leadership of the Company and the Board, and elicit the constructive participation of all Directors to facilitate effective direction of the Board'. Helpfully, it provides examples of boardroom practices that will demonstrate such leadership, and Chairmen of all types of organisations from SMEs to the largest listed companies should ensure that these vital practices are part of their governance toolkit.
The Chairman's primary responsibility is to ensure the effective operation of the Board such that the Board works as a group towards achieving the Company's strategic objectives. He should also provide guidance to the MD/CEO and be available to him for regular communication. The Chairman's functions should include agreeing an annual Board plan with the Board; ensuring that the agenda for Board meetings is set; ensuring that the Board and its committees are composed of individuals with relevant skills, competencies and desired experience; ensuring that Board meetings are properly conducted; ensuring that the Board is effective and functions in a cohesive manner; ensuring that induction programs are conducted for new Directors and a continuing education program is in place for all Directors; ensuring effective communication and relations with the Company's shareholders and other stakeholders; and taking a lead role in the assessment, improvement and development of the Board. The Chairman is responsible for ensuring that management provides the Directors with accurate, timely and adequate information.
How critical are these responsibilities of the Chairman? According to renowned UK businessman Sir John Harvey-Jones who was the Chairman of Imperial Chemical Industries plc (ICI) from 1982-1987 (once the largest company in Europe) "If a company is successful it is due to the efforts of everyone in it, but if it fails it is because of the failure of the board. If the board fails it is the responsibility of the Chairman, notwithstanding the collective responsibility of everyone. Despite this collective responsibility, it is on the Chairman's shoulders that the composition and performance of that supreme directing body depends". This statement is extraordinary given the fact that while most Chairmen may be business leaders, they rarely have specific training for the role and literally learn on the job or from other Chairmen. This leads to a wide variety in styles and broad range of board effectiveness, with some Chairmen being mere figureheads – leading to a lack of management oversight, while other Chairmen are very successful in leading effective and high preforming boards.
How do you ensure that you are a Renaissance Chairman that will guarantee the long-term success of your company? In addition to the practices contained in the Governance Code, have a good understanding of your company's operation as well as the sector and business environment. You must be fully committed to the company and put in the required time and prep work before meetings. Provide support to the CEO and ensure that the board received quality board packs that allow them to make decisions quickly and effectively. Maintain your board's strategic focus by ensuring that you don't spend unnecessary time dwelling in the past on operational matters. During meetings you want to be a facilitator and not the expert, ensuring that all directors play to their strengths and contribute evenly. Check yourself and try not to speak for more than 10% of the time. Use committees judiciously, ensuring that they do three quarters of the board's work. Lead by example and maintain your objectivity and ethical foundation, while building strong board relationships and a culture of respect, trust open dissent and candour.
Originally published 6, April 2021
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