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Should CEOs ever go on to become their organisation’s chairman?

15 May 2017

Should CEOs ever become their organisation’s chairman? - read more

The latest survey of the Governance and Compliance/Core community

ur article in the April issue on succession featured competing views on the advisability of CEOs succeeding to the role of chairman in their organisations. Accordingly, we wanted to put the question to the Governance and Compliance/Core community.

In response, just over half say CEOs should not become their organisations’ chairmen, and only one in seven (14%) say they should. However, a third of respondents sat on the fence, replying ‘maybe’.

Why there were so many ‘maybe’ responses can be explained by some of the comments, with people conceiving of certain situations where a CEO becoming chairman might be acceptable. ‘In some circumstances it may be in the best interests of the company for a short period of time, but it should only ever be an interim solution,’ said one person, with another adding: ‘This would probably be in exceptional circumstances’.

Another said: ‘In general a CEO should never become their organisation’s chairman. However, exceptionally there could be circumstances in which investors wanted their CEO to become chairman or such a move was vital to the ongoing success of the business.’ Yet another said: ‘It depends on the candidate, the needs of the business, and the candidate pool at the time of the vacancy.’

Of the small band believing succession was fine, one remarked it would be supportable ‘where you have a private company and the board is separate from the management team, and the current CEO is autonomous for the day-to-day running of the business. If the relationship is good between the two this can be achieved successfully, but it is challenging.’

Another respondent agreed, arguing: ‘For the right company and the right personality there can be no problems, especially in family-style businesses,’ while another said: ‘With a small company that would be fine, so long as statutory disclosure is observed.’

We then asked respondents in what circumstances, if any, it would be appropriate for the CEO to succeed as chairman. This led to some interesting responses, including one person’s experience: ‘I think it would be useful in situations where the CEO who had been lined up in the succession planning suddenly changed their mind. This did happen in a company I worked at. It permitted the outgoing CEO to become chairman for a short while until another CEO was identified and helped ensure stability and a smooth handover period.’

Another respondent noted: ‘When the CEO was the original founder of the business and continues to hold a significant shareholding, it is probably best for all shareholders if in such circumstances the CEO transitions out of the business via the chairmanship.’

One person suggested that a CEO might become the chairman ‘when the business of the organisation is particularly complex and it would be detrimental to the board for the company to have someone chairing board meetings who did not fully understand the business – and it would take that person a number of years to get the required level of knowledge.’

Another thought: ‘One circumstance might be for short-term continuity if there was a hiatus in appointing an independent chairman.’

One respondent pointed out: ‘It might be appropriate for a CEO to become the organisation’s chairman if, for example, a founder director wished to step down as CEO, but had such significant standing within the industry, or relationships with key customers, that his or her continued involvement as a figurehead for the company was vital to the ongoing success of the business.’

Finally one person said: ‘I worked in a small listed company. The founder realised the organisation had outgrown his executive skills. He brought in a team of experienced executives and became chairman. It worked well.’

If you are a company secretary or governance professional at a leading UK business, and you would like to take part in or comment on future surveys, email team@core-partnership.co.uk

Conducted in association with The Core Partnership

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