Why You Need an Independent Board Chair

Sometimes, people need to hear hard truths in order to grow. The same can be said for corporations. Often, it’s the board that steps in when the CEO or management is making decisions that run counter to the long-term interests of the company and shareholders.

However, if your board members (and particularly the board chair) are not independent, they may not be willing to stand up to management. Here’s a look at why you need an independent board chair, what the position entails, and how to select the best person for the job.

The Growing Trend of Independent Chairs

Companies that include both a board of directors and a C-suite team do so in order to have a system of checks and balances. However, some companies combine the roles of CEO and chairperson — largely defeating the purpose of having a board in the first place.

CEOs with too much power are often at the root of financial scandals. As more companies have learned this (and some learn the hard way), there’s been a dramatic shift in the way boards treat the roles of CEO and chairperson. Here are some compelling statistics involving the S&P 500:

  • The percentage of companies with an independent board chair increased from 30% in 2018 to 37% in 2022
  • The percentage of companies combining the roles of chair and CEO decreased from 49% in 2018 to 44% in 2022

Hiring an independent chair makes it more likely that the board will remove problematic CEOs before they cause serious damage to a company’s finances, reputation, or both. However, that’s far from the only benefit an independent board chair can offer your company.

The Many Roles of an Independent Board Chair — and How They Help Build a Better Company

In a sense, an independent board chair is the glue that holds your board and CEO together. From overseeing board meetings to mentoring company leadership, a competent independent board chair can make your company stronger. Here’s a look at some of the most important functions of an independent chair.

Mentoring the CEO

Having a sounding board and adviser is never a bad thing for a CEO. But if your company’s CEO is relatively inexperienced, mentorship can be truly invaluable. An independent board chair will often advise the chief executive and offer tips to help them grow as a leader (and therefore help the company grow).

Your independent chair will generally provide the CEO with feedback from the board. And because your chair is also serving as a mentor, they’re uniquely equipped to help your CEO analyze that feedback and implement any necessary changes.

Optimizing the Board and Governance in General

An independent board chair is responsible for calling and overseeing meetings, but that’s only the beginning. Chairs are tasked with managing the board and facilitating communication between the board and management. These processes involve several unique duties:

  • Consulting with the CEO to create agendas for board meetings
  • Leading annual evaluations of the board
  • Helping board members implement changes deemed necessary during evaluations
  • Leading annual shareholder meetings (and calling special shareholder meetings when needed)
  • Regularly consulting with other board members for feedback on the board’s general effectiveness
  • Facilitating communication between the board and the C-suite
  • Setting and maintaining expectations for the board

In order to be successful, an independent chair must be able to look ahead and identify potential issues before they become full-blown crises. The best way to do this is to be in constant communication with the CEO and the rest of the board.

Liaising Between the Board and Shareholders

A company’s board of directors regularly makes decisions that impact shareholders, and it’s generally the responsibility of the independent chair to keep those shareholders informed. The chair is the person who (usually) represents the board as a whole when communicating with shareholders. If a shareholder has a specific concern, they usually consult directly with the chair.

Selecting and Onboarding New Board Members

The board’s chair cannot unilaterally select new directors to join the board. However, they work with the board’s nominating and governance committee and the CEO to select, interview, and evaluate potential candidates. Once a new board member has been chosen, the chair will typically work with them to help them understand the role and thrive in it.

Selecting Your Independent Chair

Choosing a chair has no one-size-fits-all approach. There’s some disagreement over what kind of background makes the best board chair. Some say that former CEOs make the best directors, as they can understand the current CEO’s position. Some CEOs might have greater respect for chairs who have served as chief executives in the past.

Others believe that selecting a former CEO actually puts the company at a disadvantage. They think that because of their background, a former CEO might have trouble seeing where management ends and governance begins.

There is one thing that’s almost universally agreed upon, however — it’s often best if the independent chair is retired. Ordinarily, the time commitment to the job might not be overwhelming. But if the company runs into a crisis (and the board inevitably must help navigate it), it will be nearly impossible to hold another job while acting as the board chair.

Generally, the company’s CEO should have some input when selecting the chair of the board. But in order to maintain the company’s system of checks and balances, the current members of the board must have the final say.

Keep Your Company Strong and Secure With an Independent Chair

If you don’t already have an independent board chair, you might be concerned with how adding one may disrupt your current board of directors. However, in most cases, that temporary disruption is well worth it. 

An independent director will give you the honest feedback you need to grow your company — even if it runs counter to what management recommends. Once your new chair is settled in, you can rest assured your company has another layer of protection —  and an even greater chance for long-term success.