Has the role of Chairman changed?
Author: Michael Patterson
Applies to: England and Wales
Following the announcement that Sir Philip Dilley, chairman of the Environment Agency, would step down in the aftermath of the latest floods to hit the UK, we look at the role of the Chairman.
As non-executive chairman should Sir Philip have 'carried the can' for the latest failing of the Environmental Agency to prepare parts of the UK for heavy rainfall and should it matter whether or not he was on the ground at the time?
The Role of a Chairman
In addition to the statutory duties of a director, the role of the chairman of the board of directors has generally required them to:
- facilitate the setting of long term strategy
- appoint, induct, support, challenge and evaluate the senior management
- review the success of strategy set by the organisation
- preside at and facilitate board and committee meetings to ensure board resolutions are carried out and documented
- ensure effective communication with stakeholders and
- act as an ambassador for the organisation
For chairmen of listed companies there are specific additional duties relating to the relevant exchange.
Although the chairman does not necessarily need to be a non-executive director, the role should be distinct from the CEO and other senior managers to allow for an independent check and balance. Often, as was the case with Sir Philip, they will be part time and, relative to other executive senior managers, averagely remunerated.
Where did Sir Philip Fall Short?
Given the above, it was not Sir Philip's job to identify where flood defence money should be best spent by the environmental organisation - that was the role of executive senior management.
Nor was it his job to be on the ground helping to deal with the aftermath of the flooding - this was the (unenviable) role of the emergency services.
However, it may be that the ambassadorial and communication responsibilities of a part-time chairman is nowadays expected to extend to being on the front line when things go wrong. When other organisations experience downturns in performance perhaps we expect the chairman of the board to appear in front of the cameras and shareholders, rather than the executive management that made the day to day decisions.
So do we need to add 'scapegoat' to the list of roles? Sir Philip's resignation letter hints at this:
"My reason for resigning is that the expectations of the role have expanded to require the chairman to be available at short notice throughout the year, irrespective of routine arrangements for deputy and executive cover. In my view this is inappropriate in a part-time non-executive position, and this is something I am unable to deliver".
What does this mean for Chairmen?
There is little doubt that the example of the Environment Agency is clouded by failings in the way the crisis was handled and communicated to the public and there are clearly demanding expectations of a chairman of such a highly visible organisation.
It does however re-emphasise that the days of a chairman's roles being largely hands-off and ceremonial are gone. It must leave a number of chairmen wondering what is truly expected of them.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.