Chapter 4: The Chair–CEO Relationship — The Hinge Governance Swings On
What Good Looks Like — a board-level guide to governance done well
Every board has a hinge. It isn't in the terms of reference or the committee structure, and it rarely comes up in a board evaluation. It's the working relationship between the chair and the chief executive, and almost everything else a board does swings on it.
Chapter 2 drew the line between oversight and management. The Chair–CEO relationship is where that line gets held, or quietly given up, week in, week out. The chair leads the board. The CEO leads the organisation. When those two people work well together, a board functions: it hears bad news early, argues properly, and changes its mind when the evidence says so. When they don't, a board performs. It meets, minutes and approves, and has very little grip on what is actually happening.
Trust: the part nobody writes down
Good trust between a chair and a CEO has a simple test. Can the CEO ring the chair with a problem they haven't solved yet, and expect help rather than a black mark? Can the chair say "I'm not convinced" without the CEO hearing "I'm after your job"?
Where that trust is missing, the CEO starts managing the chair. Papers get polished until they reassure. Problems arrive solved or not at all. The chair senses it, starts going round the CEO to find out what's really happening, and the relationship gets worse from there.
Too much trust fails differently. The chair becomes the CEO's defender rather than the board's leader, and the two of them turn into a unit the rest of the board can't get past. Decisions get settled in the pre-meeting and ratified in the room.
Challenge: the chair's job is to make it normal
A chair doesn't need to challenge everything personally. The job is to make sure the board challenges well — specifically, proportionately, and at the decision rather than the person — and that the CEO experiences it as part of the role, not an attack.
When challenge is too weak, you get assurance by assertion. "The team are on it" becomes an acceptable answer to a serious question. When it tips into a running campaign against the CEO, executives stop bringing anything uncertain to the board, which is exactly what the board most needs to see.
Boundaries: where the lines sit
Most Chair–CEO breakdowns involve one of them drifting into the other's territory, usually with good intentions. A chair who is in the building three days a week, briefing managers directly, has become a shadow CEO. A CEO who decides what the board gets to see has taken over part of the chair's job.
The simplest protection is to write the split down. The UK Corporate Governance Code expects the responsibilities of the chair, chief executive, senior independent director, board and committees to be set out in writing and agreed by the board. It's also firm that the chair and chief executive roles shouldn't be held by the same person. Plenty of organisations aren't bound by the Code, but it's still the clearest benchmark around.
Wells Fargo is a well-documented case of what happens when all three give way at once. John Stumpf was both chairman and chief executive while the bank's retail sales practices scandal built up, with millions of accounts opened without customers' consent. The board's own independent investigation, published in April 2017, found sales practices weren't identified to the board as a noteworthy risk until 2014, and that management reports didn't accurately convey the scope of the problem. It concluded Stumpf was "too slow to investigate or critically challenge" what was going on. With one person leading both the board and the business, there was no separate chair whose job was to ask. After Stumpf stepped down in October 2016, the board split the two roles, appointed an independent chair, and changed its bylaws so the roles have to stay separate.
Where to start
None of this needs a restructure. It needs a few deliberate habits.
Write the split down, and look at it once a year. One page: what the chair leads, what the CEO leads, and what's shared. Agree it as a board, and revisit it whenever something big changes — a new CEO, new owners, a difficult inspection.
Agree what reaches the chair between meetings. A standing rule on which kinds of news go to the chair, and how quickly, stops the board hearing about a serious problem from someone other than the CEO.
Make sure there's a second route to the board. In a healthcare provider, that means the registered manager and the Freedom to Speak Up guardian can reach the chair without going only through the CEO. It isn't a vote of no confidence. It's how a board knows its main information line is working.
If the roles are combined, say how you compensate. An independent non-executive with a lead role, meetings of the non-executives without the executive present, and a plan for when the roles will split.
Once a year, talk about the relationship itself. Chair and CEO each answer the same questions separately. When did the CEO last bring an unsolved problem to the chair? When did the board last send something back? When was the CEO last properly appraised? Then compare. The gaps between the two sets of answers show you where the hinge is sticking.
