Vodacom Chairman’s Forum

The role and function of the chairman

SUBMITTED FOR DISCUSSION BY PETER MOYO

INTRODUCTION

The role and function of the chairman in the company structure is as follows: • The chairman of the board of directors is the leader of the board, and functions with

the understanding that the board is the highest authority in the company in service of the shareholders. He or she is thus the leader of the company.

• The chairman is the link between the board and the CEO. A sound relationship between the chair and the CEO is thus crucial. The chairman must however take care not to assume the role of CEO. The chairman must be head on, but hands off – it is only in exceptional cases that he or she may be hands on.

• The chairman is also the link between the company and the shareholders.• The chairman continues to represent and act on behalf of the board between meetings.

SPECIFIC RESPONSIBILITIES OF CHAIRMAN

The responsibilities of the chairman include oversight, strategy, governance and succession planning. To achieve success, the following points should receive attention:• Strategy formulation and governance is greatly facilitated if the company has a top-

notch executive team with high ethical standards. This implies that the selection of the team (and particularly the CEO) is a crucial task for the board and the chairman.

• The chairman must, from the outset, ensure that robust processes for succession planning are established. These must be in place well before the succession event.

• The choice of the team at the top does not begin and end with the executives. In fact, it starts with the choice of the board. A company with both a strong board and strong executive is bound to achieve sustainable success, compared to one which has either a weak board or executive or both.

• Once in place, the chairman has to ensure that the company has a strong and functional board. Having high-calibre people on the board does not, on its own, guarantee a functional board.

CHAIRMAN’S ROLE IN SELECTION OF THE BOARD

The chairman needs to ensure that the company has a strong board. The following points deserve attention:• The starting point is to be clear on the mission, vision, values and strategy of

the company.• With these as guiding principles, the chairman should lead the board in the choice

of board members along the following lines: o Board members should be chosen for the skill and competence they are able to

contribute. It is imperative that the board, directed by the chairman, is clear about the competence required of them.

o Board members should perform their duties not only with the requisite skill, but also with judiciousness and care. They should, in fact, treat the company as if it were their own.

o It is essential that the chosen board members have the time to devote to the affairs of the company.

o Last but not least, the board should comprise ethical men and women.• The chairman must ensure that there is ongoing renewal in terms of the knowledge

base contained within the board and in terms of refreshing the board with new thinking.

REQUIREMENT OF STRONG CHAIRING SKILLS

Bringing out the best in the board members depends on how the chairman leads the board meetings. Important points to note:• Much as the chair must be strong, he or she should not be domineering. • The chairman should solicit the views of each board member and not allow one or two

people to dominate the board. • What value do those bring who say little or nothing? If these reticent members were

appropriate choices, it behoves the chairman to draw on their knowledge, skills and wisdom.

• The chairman cannot conduct the meeting and be the main player.

Vodacom Chairman’s Forum

• Try as the chair may to achieve this, the board meeting cannot deal in sufficient detail with all the issues to which the board should attend. The chairman, through the nominations or governance committee, should ensure that the board appoints enough committees to deal with board matters in appropriate detail. These committees should be chosen properly, with clear charters or mandates. The chairman should make sure that the committees report adequately to the board. It is important that the chairman has a reasonable understanding of the agenda of each committee.

CHAIRMAN’S EVALUATION ROLE

It is the responsibility of the chairman, through the nominations and governance committee, to see that the effectiveness of the board is reviewed on an annual basis. To achieve this, the following should occur: • The chairman must be central in the evaluation of the board. • The chairman must also subject him- or herself to regular review by the board, through

the nominations or governance committee. • It is advisable that the board has an external evaluation over a set period, say, every

three years. The review should cover the board, its committees and the individual members themselves.

ROLE OF LINKING WITH THE COMPANY’S EXECUTIVE

The chairman is the link between the board and the company’s executive. His or her role, vis-à-vis the company’s CEO and executive, is as follows:• An important part of the chairman’s job, along with the board, is the selection of

a new CEO. • The chairman, along with the board, is also concerned with the choice of the team

around the CEO. It is this executive team that brings its thoughts to the board, in order that the board may fulfil its responsibility of formulating the company’s strategy. The difference in the strategies of two companies working in the same industry and in the same country boils down to the people that lead those companies. The role of the board in the choice of the CEO and the executive team at the top cannot be overemphasised.

• The chairman should ensure that the company has a CEO that is fit for purpose and leads the company in the way required by the board.

• The chairman should ensure that there is a proper succession plan around the CEO.• The chairman should ensure that the CEO has proper succession plans for each of

the top executives. In many boards this is the weakest link. Succession planning to determine the choice of the team at the top is the single most important job of the chairman and the board.

• The chairman should acquaint him- or herself with the top executive team.• The chairman should be the CEO’s sounding board on some of the important matters

or decisions of the company.• It is imperative for the chairman to ensure that there is a proper balance of power

between the CEO and the chairman. A well-functioning company is one that has a strong CEO and a strong chairman. But the one must not dominate the other. It is the responsibility of the chairman to ensure that this balance exists.

ROLE OF LINKING WITH SHAREHOLDERS

An important role that the chairman has to play is creating and maintaining the link with the shareholders. To establish this link, the following should form part of the chairman’s role:• While it may be taken that the CEO will discuss company strategy with shareholders,

the chairman should meet shareholders at least once a year to talk about the board, the top team, and the governance of the company. These discussions should include:o An honest assessment of the strength and the functioning of the board;o The adequacy of the succession planning process;o The remuneration of the top team; ando The rationale for some of the important decisions to be taken at the AGM.

Vodacom Chairman’s Forum

THE CENTRE FOR CORPORATE GOvERNANCE IN AFRICA

The Centre for Corporate Governance in Africa at the University of Stellenbosch Business School conducts multi-disciplinary research and offers educational and development activities to improve the effectiveness of corporate governance in African organisations.

The Centre focuses on:• The development of the compliance and performance aspects of directors’ attitudes,

knowledge and skills; and• The link between corporate governance, business ethics and total organisational

performance.

The purpose of the Centre is to improve the effectiveness of corporate governance within African organisations, predominantly in the private sector.

The vision of the Centre is to be the leading provider of research and educational services on the African continent in the area of corporate governance.

The mission of the Centre is to develop both the compliance and the performance aspects of directors’ attitudes, knowledge and skills, as well as the link between corporate governance, business ethics and total organisational performance.

Tel: +27 (0)21 918 4381Fax: +27 (0)21 918 4468E-mail: governance@usb.ac.za

Postal address:PO Box 610Bellville 7535South Africa