ACCA SBL Syllabus B. Governance - Role of the Chairman - Notes
Roles of the chairman in corporate governance
Roles and Responsibilities
Provide leadership to the board
The chairman is responsible for ensuring the board’s effectiveness for shareholders, by setting the agenda and ensuring meetings occur regularly
The chairman represents the company to investors and other outside stakeholders/constituents.
Effective communication with shareholders
The ‘public face’ of the organisation So, the chairman’s roles include communication with shareholders.
This occurs in a statutory sense in the annual report and at annual and extraordinary general meetings.
Finally, the co-ordinating of NEDs and facilitating good relationships between them and executives
Ensuring the board receives accurate and timely information
Benefits of separation of roles of Chair & CEO
Frees up the chief executive to fully concentrate on the management of the organisation
Allows chair to represent shareholders’ interests
Removes the risks of ‘unfettered powers’ in one individual
Reduces the risk of a conflict of interest in a single person being responsible for company performance whilst also reporting on that performance to markets
Chairman provides a conduit for the concerns of non-executive directors
Ensures the CEO is responsible to someone named directly
Agrees with most best practice codes
Importance of the chairman’s statement
An important and usually voluntary item, typically at the very beginning of an annual report.
Conveys important strategic messages
Allows chairman to inform shareholders about issues Legal rights and responsibilities of Directors (Breach of responsibility can leave director open to criminal prosecution)