Chairmen and their CEOs

Believe it or not, in the last ten years I’ve been chairman of around 30 companies, some public, some VC-backed. There was a time when I thought too much fuss was made about the importance of the relationship between the chairman and the CEO. Not anymore!

My own involvement with PartyGaming for the last 15 months (of which the description ‘interesting’ would be a typical British understatement) has brought home to me how utterly crucial a strong CEO-chairman relationship is for a business.

Another well-known group that I have chaired is Sage. My involvement lasted 23 years, the last ten as chairman to CEO Paul Walker. The search for my successor as chairman was extremely illuminating. There was a wide range of views from the candidates as to what their role would encompass. One grandee explained that it was a two-day-a-week job and he needed an office in Newcastle next to Paul. Paul’s comments on this approach are alas unprintable.

So, let’s start by listing a few of my maxims on the dynamics between the CEO and chairman. I am in the camp of decision makers that believes very few CEOs ought to progress upwards to chairman of the same company – that is, unless they are really remaining as executive, even though they call themselves non-executive directors (NXDs).

Being a non-executive requires a totally different mindset from being executive. To be a successful non-executive requires you to be consultative by nature. The best NXDs get involved less rather than more, respond rather than react, advise rather than order.
In the public company arena, the view is that if things go wrong it
is the chairman who is ultimately responsible. So how does this square with being consultative?

The chairman’s balancing act
The most important requirement for a chairman is to know the strengths and weaknesses of the CEO. This is not usually based on endless business meetings about the nitty gritty of the business itself, but little pointers that you pick up on in behaviour. For example, how does the CEO act in relation to his or her own remuneration? Is the approach greedy? Is there concern for the people who report directly to him, or just himself? Other pointers come from how the CEO reacts to criticism, pressure, success or failure.

If you have a CEO with whom you have a relationship of trust, the hands-off and consultative approach by the chairman works a treat – if not, life is much more difficult. If that is the case, there is a good chance that one or other of the two key people in the company won’t be around for long together.

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