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Chairman of the Board

Introduction

What do Bill Gates, of Microsoft Corporation, Michael Dell, of Dell, Inc., and Warren Buffet of Berkshire Hathaway, Inc. all have in common…besides a lot of money? Well, they are all Chairmen of the Board of Directors of their respective corporations (as of the time of this writing).

The term "Chairman of the Board," or "Chairman" for short, refers to the highest position on the board of directors of a corporation, non-profit organization, agency, or other body. The Chairman is the leader of the board of directors and works to inspire, manage, and build the ideas, relationships, and policies that give direction to a corporation.

In this article, we’ll focus on the Chairman of the Board in a corporation, as opposed to an organization, agency, or other body. (But many of the principles that we’ll discuss in this article apply to chairmen in all types of structures.) We’ll also explore some of the main functions of the Chairman of the Board, how the Chairman of the Board leads a corporation’s Board of Directors, and some famous Chairmen of the Board.

Next, we’ll look at the general responsibilities of the Chairman of the Board.


Chairman of the Board’s Roles

The actual term "chairman" is derived from feudal England where the King sat alone on a chair for the rest of his royal bench to see. So, the term "chairman" has come to represent a position of power. Frank Sinatra even acquired the nickname "Chairman of the Board" after founding Reprise Records because of the prestige that the title holds (Sinatra did not actually head a Board of Directors).

The Chairman of the Board of Directors is kind of like the captain of a ship, and can have many roles and duties. The Chairman must first be a director on the Board of Directors. The Chairman must generally perform duties that may be assigned to him or her by the Board of Directors. The Chairman may also be an officer, but doesn’t have to be.

The Chairman oversees how the board of directors of a corporation operates and helps lead the board in making big company decisions. The Chairman must work to unify, inspire, and manage the workings of the board of directors in order to give the company proper direction. The Chairman may also often act as a spokesperson for the corporation by conducting interviews and other public relations events.

Overall, the position of Chairmen can be classified into 2 broad types: (i) non-executive and (ii) executive. A non-executive chairman is generally a temporary position that provides support and advice to the Chief Executive Officer, CEO for short. An executive chairman can often be a full-time position which leads the board and even takes on some day-to-day responsibilities of the corporation.

As you can see, a Chairman’s roles and duties can differ depending on the size, structure, and industry of the corporation. With that said, some general duties of the Chairman include the following:
  • Run board meetings
  • Set agendas for the board
  • Create subcommittees for the corporation
  • Provide financial advice
  • Critique performance of the corporation
  • Provide certain administrative duties
  • Oversee officers’ work
  • Provide recommendations for improving performance
  • Attend other meetings, like shareholder meetings
  • Determine compensation structure of board, if any
  • Attempt to get all board members to contribute
  • Consult outside advisory boards for certain information
When it comes to voting at board meetings, the bylaws or a vote of the board generally dictates how the chairman can vote. The chairman generally can vote in 2 ways: (i) to break up ties or (ii) or on any issues other directors can vote on, i.e. a regular vote.

NOTE: There is only 1 chairman on the board of directors. The board of directors generally has between 3 and 11 directors. Larger corporations generally have anywhere from 7 to 11 directors, or more. U.S. law requires that a corporation have at least 3 directors, unless there are only 2 shareholders or less in the entire corporation (e.g. with small corporations). If there are 2 shareholders or less, then there must be at least that many directors. So, if there are only 2 shareholders, there must be 2 directors. If there is only 1 shareholder, then the corporation must have 1 director.

Next, let’s take a look at chairmen of some of the world's most famous corporations.


Chairmen of Famous Corporations

Some of the most well-know men and women in the corporate world act as the Chairs of their company’s Board of Directors. Here are some well-known corporations and their Chairmen (some faces which you’ve likely seen before, some which you may have not):

Microsoft Corporation
Bill Gates

Berkshire Hathaway, Inc.
Warren Buffet

Dell, Inc.
Michael Dell

Google, Inc.
Eric Schmidt (helped founders Larry Page and Sergey Brin build Google)

McDonalds Corporation
Andrew J. McKenna (as of 05/27/09)

Finally, we’ll wrap up this article by going over some main considerations.


Conclusion

In this article, we explored the roles and responsibilities of the Chairman of the Board of Directors, and some of the differences between the positions of CEO and Chairman. The Chairman of the Board can take on many roles such as leader, guide, mentor, and spokesperson. The Chairman of the Board generally works very closely with the other directors on the board and with CEO and other top-officers to help the corporation prosper. You should now have a better idea about the importance of the Chairman of the Board – the person that often acts like the captain of a ship.

While Frank Sinatra didn’t hold an official Chairman position at Reprise Records, he was nicknamed “Chairman of the Board” because of the prominence of the title. The role of Chairman of the Board can be a difficult one, and sometimes the Chairman has to take a difficult position that conflicts with others’ viewpoints. The famous words sung by Frank Sinatra, "I did it my way," often hold true in the corporate world, all the way to the top – to the Chairman of the Board of the biggest corporations in the world.



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