What Is a Chair of the Board (COB)?
A chair of the board (COB) holds the most power and authority on the board of directors and provides leadership to the firm's officers and executives. The chair of the board ensures that the firm's duties to shareholders are being fulfilled by acting as a link between the board and upper management.
Key Takeaways
- The chair of the board (COB) heads the board of directors, provides leadership to the firm's executives and other employees, leads the charge on big-picture decisions, and sets the tone for the corporate culture of the company.
- The average compensation for a chair of the board from outside the company is $185,000, according to Salary.com
- The chair takes on their role following a vote by the board of directors; similarly, the chair can be removed by the board if the board decides they are failing to live up to expectations.
- In some cases, the chair may also hold the title of president or chief executive officer of the company; these titles refer to executives who are typically more involved in directly executing strategies set out by the chair and the board.
- A board might show its faith in the CEO by elevating them to chair; a chair might jump into the CEO on an interim or permanent basis if a CEO resigns or is fired and no suitable replacement can be found.
Understanding the Chair of the Board (COB)
The chair of the board is voted into his or her position by a majority vote within the board of directors. Because the position has substantial interaction and influence with both the board and management, the chair is arguably the most powerful position in the company.
Frequently, but not always, the chair is the member of the board with the greatest stake in the organization, holds a controlling interest in the organization,and holds the mostvoting power of any individual. Long-term decisions, such as whether or not to pursue a merger or sale of the organization, may be determined by the board under the chair's leadership. The chair also has significant influence over other board decisions, such as appointments of executive officers or dividend policy.
The chair of the board is also known as the chairperson, depending on the preference of the company and the individual.
Role(s) of Chair of the Board
The chair may or may not be involved in the daily operation of the company, sometimes serving in a more remote advisory role but providing ultimate oversight of the actions taken by the executives. Whereas a president or chief executive officer (CEO) is directly involved in planning and putting a company's strategies into action, the chair may set goals and objectives, with the input of the rest of the board, that the executives are expected to achieve.
Such goals may include reaching profitability targets, expansion of market share, growth of the client base, and presenting a favorable image for the company in the public eye.
It is not unheard of for the chair to simultaneously hold the CEO position within an organization. This may occur if the board wishes to elevate the CEO to chair as a sign of confidence in their leadership, granting them direct executiveauthority as well as serving as the architect for the broader strategies the company will pursue.
Chairman of the Board
The Chair of the Board can also serve as Chief Executive Officer. Since part of the board's role is supervising management, that dual role may sometimes create the appearance of a conflict of interests.
Challenges Being Chair of the Board
The role of the Chair of the Board presents several challenges that require adept leadership. Maybe the biggest significant challenge is managing board dynamics and fostering effective communication among diverse members. Each board member comes with varying viewpoints and agendas. It's usually up to the Chair of the Board to foster an inclusive and respectful environment while facilitating constructive discussion.
Another challenge for the Chair of the Board is maintaining independence and objectivity while working closely with the CEO and other executives. They usually try to strike the right balance between oversight and collaboration, ensuring appropriate checks and balances are in place without micromanaging or undermining management authority. However, these lines get blurred very quickly if the CEO serves as Chair.
Next, navigating regulatory compliance and legal responsibilities presents a complex challenge for the Chairs of the Board. They may have to stay informed about evolving regulations, governance best practices, and industry standards. They also have to keep up with legal and compliance issues and often need to conduct regular risk assessments.
Last, it's usually up to the Chair to plan for the future. This means succession planning and board renewal plans. Not only does the Chair need to make sure there's a diverse range of skill sets, they must make sure they're aware of who is rolling off when, and making sure there is a sufficient replacement when the time comes.
Special Considerations
CEOs who become chair may eventually seek to separate themselves from their executive duties and maintain a leadership position strictly with the board. A chair might also step into the CEO role if there is a sudden shakeup in leadership that removes the current chief executive.
In such instances, the chair might hold the CEO position on an interim basis until a permanent replacement is hired. The dual position could be made permanent if no suitable executive can be found.
How Much Does a Chair of the Board Get Paid?
Board compensation varies widely, depending on the size of the company and the industry it works in. In most cases, board members who already work for the company do not receive an additional salary, while "outside" board members are compensated. Note that board compensation is a reporting component of a non-profit's Form 990.
Are the CEO and the Chair of the Board Usually the Same Person?
In some companies, the Chair of the Board may also serve as Chief Executive Officer. This can sometimes create a conflict of interest since the board is responsible for supervising the company's executive officers.
How Do You Refer to Someone Who Wins a Board Seat?
In most cases, Board members are simply referred to as "Mr." or "Mrs.," followed by their board title, such as "treasurer." Collectively, they may be addressed as "members of the board."
Does the Chair of the Board Influence the Stock Price?
In addition to choosing the CEO and other executives, the board also determines the size of the company's dividends. It also helps guide the overall strategic direction of the company. Though any single action may or may not have a direct, traceable impact on a company's stock price, it's undeniable that a board (or at least the chair of the board) has the potential to have a sizeable effect on the share price.
The Bottom Line
The chair of the board is one of the highest supervisory roles in a modern corporation. In addition to overseeing the company's long-term trajectory, the board is also responsible for appointing executives, determining their compensation, and approving certain management decisions. As a head of the board of directors, the Chair of the Board has an outsized influence on all of these decisions.
