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January 29, 2008

Outside Chair

Longtime friend Rob Shurtleff, now a VC among many other endeavors, has started blogging. I take some of the credit for that which is only fair since he gets all the credit for my having gone to Microsoft a million years ago. Rob has interesting things to say: he recently posted that a board of directors should evaluate the CEO and give her or him feedback after each board meeting.

“…who should deliver the review? In my experience this is best done by the Chairman/women of the board, aka the Chair. In my experience the Chair can provide a key mentoring and organizing role that makes a CEO’s job easier.”

Implicit in Rob’s recommendation is that there IS a Chair of the Board separate from the CEO. Thinking back on having been both CEO and Chairman of my own startups, I think I would have done better with a separate Chair once the companies took in outside money even though I probably would have fiercely resisted the suggestion that I not hold both roles at the time.

A separate Chair makes reviews possible; everyone needs to be reviewed.

By necessity, a CEO provides most of the content of a board meeting; that’s a good reason why he or she should NOT also be moderating the meeting. A good Chair can assure that there’s a good agenda for meetings; that materials are distributed beforehand; and that time is left for important discussions. Moderation of a meeting is best done by someone who is NOT doing most of the talking.

A separate Chair provides an instant (if not long term) successor or replacement for the CEO in case of emergency.

A non-executive Chair can be more effective in getting other Board members to fulfill Board responsibilities and NOT try to manage the company than the CEO can. If the CEO is also Chair, she or he is effectively managing the Board which is oxymoronic although common.

The non-profit boards I’m on now and the Vermont Telecommunications Authority of which Mary is Chair have separate Chairs and CEOs. They function well this way, I think. The tension between CEO and Chairman is largely constructive. Here I think the private sector has something to learn from the public sector.

Obviously doesn’t make sense to have separate CEO and Chair when you’re a one person band and also the janitor, plumber, and receptionist. But the roles should split at the time you expect to have Board with real fiduciary responsibility which is presumably when there’s money in the venture besides your own. At that point you’ll have a better Board and a better company if you’re not the Chair (unless you want to be the Chair and have someone else be the CEO – that can work although founder/Chairs deserve a post of their own).

Rob’s post was in response to a post by Seth Levine on CEO reviews with lots of how-to in it.

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