2.4.10 Separate chairman and CEO

No one individual should have unfettered powers of decision.1 The CEO and the chairman of the board should not be the same person.2 The role of the chairman is distinct from that of the CEO. They have different but complementary functions and work as a tandem.3 The CEO runs the company, formulates and executes the strategy, conducts the business and is in charge of all management. The chairman runs the board and acts as the coach of the CEO and should be happy with the success of the CEO. Not only is there nowhere a description of the chairman's role, but it is hardly recognized in company legislation. Indeed, unlike executive directors and NEDs, the chairman often does not even receive a job description from the company. Nonetheless, the chairman is responsible for leadership of the board, ensuring its effectiveness in carrying out all aspects of its role and setting its agenda. The chairman is also responsible for ensuring that the non-executive directors receive accurate, timely and clear information.4

The chairman should ensure effective communication with shareholders.5 The chairman should also facilitate the effective contribution of non-executive directors in particular and ensure constructive relations between executive and non-executive directors.6 An illustration of the importance attached to the chairmanship of the board is the provision that in the largest (the FTSE 100) companies a person should hold only one chairmanship (this restriction is currently onder review by the Financial Reporting Council (FRC), because of the difficulty of fmding good chairmen if the pool of eligible candidates becomes so restricted). The Walker Review recommends that chairmen of major banks should work two-thirds of their time for the bank.7

Also "the retiring CEO should not move on to become chair of the board."8

Half of UK listed companies had separate chairmen in 1989, three-quarters by 1994 and nearly all in 2008.9