Ever since stock-listing requirements prompted many US companies to name an independent director to serve as the chairman, lead director, or presiding director of the board, these companies have been grappling with what, exactly, this board leader should do and how to find the right person for the job.
The change in governance followed corporate scandals (in the early part of the decade) that led to investor pressures to strengthen corporate governance by separating the roles of CEO and chairman. This separation represented a step into the unknown, because the CEO traditionally served as chairman in most US companies and was the board’s undisputed leader. The combined role of CEO and chairman is still very common, but the governance structure at most Fortune 100 companies1 has now been complemented by a presiding or lead director, who plays a substantial role in leading the board’s work.
To examine how the new board leader role has evolved, and the best practices for appointing one, we invited 11 current and former board leaders of large US companies to share their views and experiences (see sidebar, “Who’s who”). One of their insights was that there is little difference in how their companies utilize the board leader whether the organization refers to that person as a presiding or lead director or as a nonexecutive chairman, although a few interviewees saw the latter title as having more importance symbolically. These board leaders spoke of a role that has grown beyond mandated process requirements, to carry a more substantive meaning for the creation of corporate value. At many leading companies today, the board leader is a real partner of the CEO on strategy issues and has taken over or partnered with the CEO on some functions the chief executive has historically led, such as setting board agendas, recruiting new directors, and more aggressively assessing risk.