Rob Shurtleff – a VC in Seattle with Divergent Ventures – whom I’ve gotten to know over the past year, dropped me a note with some ideas about a few posts in the Board of Directors series that Jim Lejeal and I have started writing. The first topic Rob suggested has evolved into the a post titled “The Chairman”. Through the magic of Writely, I’ve involved him into a group edit on this post – what has resulted is a collaboration between the three of us.
In the public company arena, more and more companies are separating the Chairman of the Board position from the CEO. It turns out that this trend has benefits for earlier stage companies too. We believe that all CEOs – regardless of their experience – benefit from having a lead director on the board. In general, it has been our experience that boards (and the board meetings) work better when there is a Chairman in charge other then the CEO.
Some specific roles for the the Chairman follow:
- Collects input from all directors and management on the board agenda – this facilitates surfacing difficult issues.
- Creates the board meeting agenda with the CEO.
- Runs the agenda of the board meeting, holding items to schedule or extending the time spent on them if the consensus is to spend more then the appointed time on an item. This frees the CEO to focus on content and allows the Chairman to keep the meeting on track.
- Hosts an executive session without management at the end of the meeting in order to gather feedback, surface issues, and frame constructive feedback for the CEO and the management team.
- Reports any relevant feedback to the CEO.
- Collects input from the board and from the senior management team for the CEO’s annual review, writes the review, presents it to the board for approval, works with the compensation committee on CEO bonus and changes in compensation, and finally meets with the CEO in a formal performance review.
- Heads the search committee when hiring a new CEO.
In addition to being a focal point for the board, The Chairman can also be a critical mentor for the CEO. As a result, he should be a consensus choice of both the board members and the CEO. In addition, the Chairman should be a person who is made visible inside the company – such as attending and participating in all hands company meetings. The Chairman should make themselves easily available to employees (via in person, email, or phone) at any time. If bad things are happening within the company (e.g. date manipulation of stock options) employees should have a person on the board – namely the Chairman – that they are comfortable going to with any issues.
Some of the CEOs we have worked with have resisted this idea. Most have come to see it as a big plus. We’ve also found that – in most cases – boards also benefit from having a lead director as a focal point.