Some fundamental qualities that make for successful chair and board relationships with management have not changed. Having a high level of trust between the chair and CEO, for example, remains essential to a successful relationship between them and to the success of the business. CEOs should have a trusted and confidential sounding board in the chair and be willing to be vulnerable without fear of repercussions. The chair of a company in Belgium noted, “Vulnerability means reflection and questioning, which is a good thing.” Chairs should also have a deep understanding of the companies they serve and be willing to offer their time and experience generously.
What has changed is the depth and breadth of that involvement. While many chairs reported that board meetings are less formal than in the past, the responsibilities of board service and, in particular, of the chair, have escalated. “You can’t be a faraway figurehead. You need to understand the business you are involved in. You are not effective if you only know how to run boards,” one South African chair stated.
As the “ultimate chief reputation officer,” as described by a UK chair, the chair should provide a guiding hand on a wide range of internal and public-facing matters. While the challenges can be daunting, the pandemic proved that chairs could help their organisations pivot and respond to unforeseen events and even emerge stronger by focussing on big-picture goals such as innovation, digital transformation, improved efficiency and agility.
“You can’t be a faraway figurehead. You need to understand the business you are involved in. You are not effective if you only know how to run boards.”— Chair, South Africa
As traditional roles evolve, chairs can encourage new thinking and help foster innovation. Recognising that fear of change is often a greater obstacle than change itself, many chairs believe it is their job to help management be bolder and faster in how they assess risks and rethink operating models. Chairs should:
Chairs globally see the changing relationship between business and society as another key force affecting their role—and are holding management accountable for it. Without exception, across countries, they feel a deep sense of responsibility for the positive and possible negative impact their businesses have on communities and the planet. Increasingly, they see a close connection between prosperity for communities and the environment and the future of business. One chair of a Japanese company recognised that doing business itself is, or should be, a matter of ”improving the world.”
Views on how to help navigate these evolving responsibilities vary. Most chairs acknowledge a responsibility to prevent harm to local communities and address society’s most pressing challenges. A US chair explained, “Boards have to think about all their stakeholders holistically—customers, employees, suppliers, investors, regulators and government.” There is increased recognition that securing society’s acceptance of business operations should be part of any organisation’s social licence to operate. Others talked about a need for companies to collaborate with governments and with other companies, to help solve pressing societal problems. For example, the chair of an organisation in India spoke about his organisation’s partnership with 15 companies to build a shelter for migrant labourers who were especially hard hit by the pandemic.
Of course, the idea of being a good corporate citizen is not new. As one chair of a private, family-owned company in Germany noted, “Sustainability and ethical values have been part of our corporate culture for decades.” Yet what appears to have changed is the sense of urgency and the risk of being left behind for those who fail to adapt and change.
Chairs recognise they play a key role in driving the company-society relationship and effecting positive change through environmental, social and governance (ESG) strategies and stakeholder engagement. As this responsibility deepens in the years to come, chairs should work harder to:
“The ESG agenda and focus areas need to be visible and factored into the board calendar for discussion.”– Board chair, East Africa
Given the enormity of the challenge and the operational, regulatory and reputational risks it poses, climate change is top of mind for many board chairs around the world. As the chair of a company in South Africa explained, “If we as business leaders don’t recognise the impact of climate change and put it on companies’ agendas, we will not have a sustainable business. Chairs need to understand these issues to be able to drive the agenda.”
Meeting the challenge requires close collaboration between the chair and CEO, the board and management team. While implementation falls on management, chairs believe boards should play a vital role by placing climate change high on the company agenda. “It’s an iterative, dynamic process,” a UK company chair explained. “The board has been actively involved with management in assessing the risks and opportunities around climate change, in developing the policies for the near term and long term and in setting the targets.” In fact, many chairs highlighted not just the challenges, particularly regarding Scope 3 emissions, but also the opportunities that could emerge for companies that take climate change seriously and shape effective strategies to address its impact.
“There is no excuse for not moving forward. Climate puts the whole survival of the company at risk.”— Chair, a company headquartered in the Nordics
All chairs agreed on the importance of educating the board on the climate challenge. This, of course, involves devoting time to reading and self-study, but chairs also find value in inviting climate specialists to the board to raise climate fluency levels.
There’s less consensus on whether boards should add a climate specialist or establish a specialist committee. For example, while three-quarters of Italian chairs surveyed note their organisation has an ESG committee, some chairs from other countries say the board should explore climate issues together. Regardless of structure, most chairs coalesced around these necessary tasks:
Even before the pandemic, chairs and boards perceived an increasing frequency of crises and many had already experienced crises in their organisations.2 Chairs in New Zealand observed that during the pandemic, the experience of those who had navigated a crisis before became invaluable in dealing with the uncertainty and providing guidance to the board. Uniformly, chairs note that managing crises today calls for resilience and greater speed in decision-making, action and communication,3 under increased public scrutiny. Challenges can arise quickly, leaving boards little time to digest and understand every issue fully before acting. Indeed, chairs and boards may be compelled at times to take a leap of faith, making decisions with less information than desirable. In fact, some chairs said their companies now operate in a sort of continuous state of crisis management.
But operating in crisis mode has had its benefits. Encouragingly, chairs have learned a lot about their own and their companies’ ability to respond, adjust and embrace digital technologies under pressure. Concerned that their companies might revert to old ways after a crisis ends, many chairs are working to incorporate agile and responsive thinking and action as part of everyday business.
To support agility, chairs say they are holding shorter but more frequent meetings and enabling members to attend virtually, to fit those additional meetings into their schedules. And they have also intensified the number and cadence of communications with the CEO and had greater access to the senior management team. Looking ahead, the chair of an organisation based in India expects boards to resolve smaller issues by having more frequent virtual meetings. Chairs also emphasised their role in preparing their boards and companies for uncertain futures, for example, by leading discussions on scenario planning.
Companies that managed to enable business continuity during the pandemic also took decisive measures to reconfigure their business models, accelerating digital transformation. And organisations that started their digital journey years earlier had an easier time pivoting. As one East Africa chair shared, “Our investment in predictive analytics about two years before the pandemic started to pay off.”
“We deliberately created scenarios that were much more negative than what we were hearing around us. We wanted to factor in the consequences if the crisis lasted much longer than expected.”— Chair, Netherlands-based company
Board operations—the how, when and where of board work—are being transformed. Chairs of the future may need to balance the new with the perennial: running the board more nimbly and with more flexibility, while safeguarding the fundamentals of providing valuable corporate stewardship.
Like the companies they serve, chairs adjusted quickly to the pandemic, leading board meetings virtually. After a steep learning curve, many found engagement improved while meetings became more agile, shorter, more frequent and often, more focussed. Others noted that scheduling became easier, since members could be more flexible with virtual meetings and travel restrictions provided more time in the day. Boards now have experience convening at short notice to discuss matters of urgency.
Yet many chairs and board members missed some key aspects of face-to-face interactions. Remote meetings make it harder to read the room and pick up on nonverbal communication, they said. And some felt that the more exploratory board conversations were short-changed. Thus, chairs must work a little harder to keep directors focussed and attentive. As the chair of a Japanese company said, “Outside directors bring a wide range of views to the board, so I believe it is more important for me, as a chair, to summarise the opinions of each director, to manage the time for discussion and to conduct proceedings from a bird's-eye view so as not to miss any issues.”
“Outside directors bring a wide range of views to the board, so I believe it is more important for me, as a chair, to summarise the opinions of each director, to manage the time for discussion and to conduct proceedings from a bird's-eye view so as not to miss any issues.”— Chair of a Japanese company
Even with the return of in-person gatherings, virtual meetings have demonstrated their usefulness and are clearly here to stay. Chairs must decide which works effectively under which conditions and double down on fundamentals to facilitate a successfully functioning board.
Chairs expect to capture what is effective from both options by adopting a hybrid model of virtual and in-person board meetings. For example, chairs may use virtual meetings to discuss ongoing board business, such as monitoring progress, financial reporting and risks.
In-person meetings, meanwhile, may be devoted to topics involving the direction of the organisation, such as strategy, climate and technology; important workforce matters such as diversity, equity and inclusion; and executive pay. To make board and committee meetings as effective as possible, chairs are constantly exploring how prereads and other materials can be deployed to help streamline agendas. Whatever the mix ultimately looks like, chairs agreed they must strive to:
Serving as an effective board chair has never been easy. Yet chairs are being asked to provide leadership and direction to an unprecedented degree. A key challenge is trying to “find the balance between supervising, facilitating and acting as a sounding board,” explained the chair of a Netherlands-based company. Different situations will call for all of those roles, the chair advised, “so work on your communication skills.”
Board chairs are being held accountable much more than before—by the public, the media, investors, customers, suppliers, employees; and, of course, by regulators. Today’s chairs must walk a fine line between sometimes opposing choices. They should steer the longer-term strategic direction without overstepping; manage the board while encouraging debate and a multiplicity of views; support management while challenging their assumptions; and engage a wide range of stakeholders without being hijacked by every demand.
One chair of a Japanese firm noted, “It is natural that short-term profits should be taken into account, but to be a sustainable company, it is more important to operate the boardroom from a longer-term perspective.” The chair of a UK company advised, “Build a relationship with all stakeholders so you can discuss issues with them in difficult times.”
The following advice, assembled from the collective wisdom of the chairs who participated, may help provide a roadmap for the chair of the future.
1. Build relationships. Create bonds with the board, management, stakeholders and, especially, with the CEO, while also maintaining the independence of thought.
2. Prioritise for the long term. Don’t sweat the small stuff. Understand and focus on what really matters.
3. Understand the business. Chairs may struggle if they don’t know the many facets of the business, its operations, people, competitive landscape and culture.
4. Lead on purpose and values. Chairs must make tough and, at times, unpopular decisions in the long-term interest of the reputation of their organisations.
5. Be a learning leader. Confronted with many unknowns, chairs must be comfortable asking for help, continuing to learn and must lead a “learning board.”
6. Nurture a broader skill set. Technical skills matter, but so do emotional intelligence and the ability to draw out the best in others.
7. Embrace diversity. Diversity in all its forms drives productive discussion and helps prevent groupthink.
8. Be a good listener. Adding value to the organisation requires listening to those around you, especially when opinions vary, to allow views to be fully explored before drawing a consensus.
1. Be careful not to overcommit. Given the demands of serving as chair, think seriously about the number of board appointments you accept.
2. Be realistic. This is a prestigious position, but one that carries great responsibility. Be prepared to roll up your sleeves and work hard.
3. Build your pathway. Most chairs have held other board positions prior to taking the leadership role.
4. Manage the transition from CEO to chair. If you have stepped up from CEO to chair, the transition, particularly of your mindset, can be challenging, especially for first-time chairs. This is something to watch, especially in the rare circumstance of moving from CEO to chair within the same company.
5. Find a mentor. Chairs are willing to support each other. Find someone who has already experienced the challenges to help you embrace your first chair role with confidence.
As part of Deloitte’s commitment to supporting the next generation of business leaders, the Deloitte Global Boardroom Program has brought together in this report the findings from “Chair of the future” research conducted in 16 countries.5 This report collectively reflects the insights of more than 300 board chairs of some of the largest companies in the world, listed and private entities, as well as a number of large family businesses. The research was gathered via interviews, roundtable discussions and surveys over the past few years.
Some of the commentary reflects the role of chairs during the COVID-19 pandemic, but the focus is primarily on the role of the chair in the context of business strategy. The report offers readers the opportunity to learn from prominent board chairs who shared their experience and ideas.
The Deloitte Global Boardroom Program brings together the knowledge and experience of Deloitte member firms around the world to address critical topics of universal interest to company boards and the C-suite. Supplementing geography programmes, its mission is to promote dialogue among Deloitte professionals, companies and their boards and management, investors, the accounting profession, academia and government. In addition to the publication of thought-pieces on critical topics, the Deloitte Global Boardroom Program hosts a series of must-see webinar discussions with eminent panelists to enable boards and management of global companies to challenge perceived wisdom. For more information about the programme contact email@example.com.