Ken Rushton

may also be shared with the whole board. One Chairman was quite explicit in saying he used the process to get rid of weak non-executive directors.

Investors also confirm that they regard board evaluation as useful and prefer to see it being facilitated by external consultants as a check on the Chairman’s influence. Investors make the point that evaluations are only as useful as the actions that result. It is essential that the board, under the Chairman’s leadership, develops an action plan following the evaluation and that the action plan is regularly reviewed by the board so that improvements in board performance are monitored.

Qualities of an effective chairman

I asked most of the Chairmen I spoke to what they regard as the qualities of an effective Chairman. I was struck by the variety of characteristics suggested. The most common one quoted was leadership but that begs the question of what qualities make up good leadership. The list below shows all the characteristics that were mentioned:

Small wonder that effective Chairmen are not easy to find. Also, it is supposed to be the Chairman’s job to make his Chief Executive look a hero but, surely, a person with all the above qualities would be a god. One attribute I might have added is a sense of humour. In my opinion, courage ranks high on the list of desirable qualities and the list excludes the quality which I would suggest is the most important for a Chairman and for any director: good judgement. For a Chairman it is often his ability to judge people that will make him more successful, rather than his business judgement. As one Chairman said to me, ‘It’s managing the people that matters, the issues are usually relatively straightforward.’ Another said:

Ultimately the good boards have good judgement and good companies are those where the boards have made the right judgements in terms of strategy, management, and execution. We must not forget we are all individuals, we all have our faults. We must not let the requirements of corporate governance let us forget about our thoughts or forget about our judgement.

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The role of the Chairman

If judgement is so important, this suggests that Chairmen cannot be made more effective by special training. This is certainly the view of most Chairmen I met. Although they accept that induction is useful when they first join the board and they appreciate being updated on legal or other technical developments, they consider their previous experience on boards of companies has sufficiently equipped them for the job. One Chairman said he would regard a training programme as insulting and would be ‘teaching grandmother to suck eggs’. Another said you are not asked to be a Chairman unless you have demonstrated you have the necessary skills. Chairmen have created their own more informal support groups of fellow Chairmen meeting once or twice a year, which they find useful.

In conclusion, in arguing that the role of the Chairman is vital for effective governance, I would quote another of the Chairmen I have interviewed for this chapter: ‘The Combined Code can only supply a structure; it can’t supply the soul of the board. Governance depends on how well the board works, and that depends first and foremost on the Chairman.’

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