“If you are elected to chair a meeting, and the meeting goes badly because you do not exercise your power as chair, you are a nuisance.”

~ John W. Gardner 

This third article in Lyceum’s ongoing Navigating the Succession Paradox series explores the Chairman’s critical role in the CEO succession process. It examines how the Chairman must balance the nuanced interplay of leadership and power to navigate board dynamics, align conflicting interests, and propel transformation. The piece delves into how the Chairman can build and exercise influence, mediate challenges between the board and the CEO, and champion a clarity of purpose that sets in motion the organization’s continuous renewal. 

The Chairman’s Role in Navigating the Succession Paradox 

Navigating CEO succession is a delicate process that requires the Chairman to balance competing interests and drive renewal. The Chairman’s power, while not statutory, must be wielded to guide the board and organization through potential conflicts and complex decision-making. This power allows the Chairman to: 

• Align Board and CEO Interests: The Chairman must navigate the paradox where the CEO’s desire for continuity may conflict with the board’s focus on renewal and change. Through persuasive leadership, the Chairman aligns these interests for the greater good of the organization. 

• Act as a Catalyst for Action: CEO succession should not be a passive process. The Chairman’s leadership ensures the board does not simply react to circumstances but proactively steers the organization toward sustainable growth and transformation. 

• Champion Renewal: The Chairman’s role is to elevate the board’s focus beyond immediate needs and emphasize long-term vision and resilience. This approach provides clarity of purpose, ensuring the CEO succession is not just a change in leadership but a step toward continuous organizational renewal. 

Defining the Chairman’s Authorities in CEO Succession 

The Chairman of the Board occupies a unique role within corporate governance. While often perceived as a position of power and influence, it is important to delineate what statutory authorities the Chairman truly holds and where their power derives from more subtle sources. Unlike the CEO, whose authority stems from a defined executive role within the organization, the Chairman’s powers are primarily derived from their ability to lead the board by harnessing influence. In most U.S. corporations, the Chairman does not hold statutory leadership authority beyond what the company’s bylaws dictate. Instead, the role is defined by a blend of institutional responsibilities, boardroom leadership, and personal influence. 

What the Chairman’s Authorities Are (and Are Not) 

In U.S. corporate governance, the Chairman’s formal statutory power is limited. Unlike CEOs or other C-suite executives, who have clear operational and managerial mandates, the Chairman’s role is largely one of oversight and facilitation. Typically, the Chairman: 

• Leads Board Meetings: The Chairman presides over board meetings to ensure they are conducted effectively and remain focused on strategic issues. 

• Sets the Agenda: The Chairman has significant influence in shaping the board’s agenda, which indirectly impacts discussions and decisions. 

• Represents the Board’s Voice: The Chairman speaks for the board, ensuring that the collective views and decisions are communicated effectively. 

• Guides Board Deliberation: The Chairman’s leadership ensures that board deliberations are comprehensive and productive. 

However, the Chairman’s role often does not include statutory authority to: 

• Unilaterally Make Decisions: Unlike the CEO, the Chairman cannot independently implement company strategies. 

• Directly Oversee Operations: The Chairman does not manage the day-to-day activities of the organization. 

• Act as an Executive Leader: Unless specified by governance documents, the Chairman’s duties are non-executive. 

This limited statutory power means the Chairman must exercise influence through leadership, relationships, and persuasion rather than through executive control. 

Leadership vs. Power: Gardner’s Distinctions 

John W. Gardner’s insightful 1990 classic treatise “On Leadership” provides an approach how the Chairman must operate within their defined role. Gardner points out the distinction between leadership and power and while they overlap and interweave in important ways, they are not synonymous. Power, he notes, is the capacity to ensure the outcomes one wishes and to prevent those one does not wish. It is simply the capacity to bring about certain intended consequences in the behavior of others. Leadership, on the other hand, involves inspiring, guiding, and motivating to elevate the performance of others. 

An effective Chairman must embody both leadership and power, wielding each appropriately to guide CEO succession. This dual approach is especially critical when conflicts arise between the CEO and the board or when transformation and renewal are necessary. 

How the Chairman Gains and Exercises Power 

The Chairman’s power is not automatically conferred; it must be built through credibility, relationships, and strategic acumen. Here’s how a Chairman gains and exercises power: 

1. Building Trust and Credibility: 
   • Proven Expertise: The Chairman’s prior experience and demonstrated competence bolster their reputation among board members. 
   • Integrity and Fairness: Consistent ethical behavior strengthens the Chairman’s influence, making it easier to unite the board. 
2. Developing Strategic Relationships: 
   • Board Alliances: The Chairman should build strong, trusting relationships with board members, aligning them with the broader vision for the organization. 
   • CEO Partnership: Establishing a collaborative but independent relationship with the CEO allows the Chairman to mediate effectively and navigate potential conflicts. 
3. Leveraging Intrinsic Qualities: 
   • Charisma and Persuasiveness: These traits enable the Chairman to inspire confidence and motivate board members toward consensus. 
   • Visionary Leadership: The ability to articulate a clear, compelling vision helps galvanize the board and align them toward long-term goals. 

Exercising Power: From Boardroom Leadership to Planned Actions 

Once power is established, the Chairman must exercise it judiciously, especially in matters of CEO succession. Here’s how: 

1. Guiding Succession Planning: 
   • Initiating Succession Discussions: The Chairman sets the tone for succession planning, ensuring it remains a priority on the board’s agenda. 
   • Facilitating Evaluation: The Chairman leads the board in assessing the current CEO’s performance and identifying potential internal or external successors. 
2. Mediating Conflicts: 
   • Balancing Perspectives: The Chairman must mediate between differing opinions within the board and between the board and the CEO. This requires the sagacious use of both power and leadership to steer discussions constructively. 
   • Resolving CEO Challenges: When a CEO faces challenges or resistance within the board, the Chairman’s leadership ensures these issues are addressed diplomatically and effectively. 
3. Driving Renewal and Transformation: 
   • Promoting a Culture of Renewal: The Chairman’s influence should encourage the board to embrace change, ensuring the company does not stagnate. As Gardner notes, transformational leadership renews and reinvigorates the organization. 
   • Aligning with Strategic Goals: The Chairman ensures that CEO succession aligns with the company’s long-term vision, advocating for leaders who embody the desired direction and culture.  

To What Extent and Ends Should the Chairman Exercise Power? 

The extent to which a Chairman exercises power depends on the situation. In CEO succession, power must be balanced to achieve several key objectives: 

1. Ensuring Board Cohesion: 
   • The Chairman must foster unity, ensuring that board members coalesce around shared decisions. This creates a stable environment for implementing succession plans. 
2. Safeguarding Strategic Continuity: 
   • Power should be used to guide the organization toward its strategic goals without creating dependency on the Chairman’s influence alone. 
3. Championing Impartial and Transparent Practices: 
   • The Chairman’s power must be exercised with fairness and transparency, ensuring impartial decision-making throughout the succession process. 
4. Facilitating Transformation: 
   • Power is exercised to inspire a readiness for renewal. The Chairman’s leadership helps the board move beyond transactional operations to focus on long-term transformation, ensuring that CEO succession is not just a reactive process but an invaluable opportunity to adapt a firm’s strategy to meet current and future demands in the marketplace. 

Navigating the Relationship Between the CEO and the Board 

One of the Chairman’s most significant challenges lies in balancing the CEO’s role with the board’s oversight. The Chairman must: 

• Act as an Intermediary: Serve as a bridge between the board and the CEO, facilitating constructive dialogue and mitigating conflicts. 

• Encourage Open Communication: Foster an environment where the CEO feels supported yet held accountable, ensuring that the board can express concerns without undermining executive leadership. 

• Lead with Both Strength and Empathy: Exercise power in a way that balances firm decision-making with empathy for the CEO’s challenges, encouraging a collaborative approach to resolving strategic issues. 

Conclusion: The Chairman’s Dual Role in CEO Succession 

The Chairman’s role in CEO succession encapsulates the nuanced interplay between leadership and power. While statutory authority may be limited, the Chairman’s ability to lead through influence, integrity, diplomacy, and strategic insight is paramount. By fostering trust, uniting the board, and guiding the succession process with vision and clarity of purpose, the Chairman not only supports the organization’s immediate needs but also propels it toward long-term transformation and renewal. The effective Chairman exercises power not for personal dominance but to ensure the board and organization are positioned to thrive, adapting to future challenges with resilience and foresight. 

We will be back soon with our next installment of Navigating the Succession Paradox, where we’ll examine the role of the Board of Directors—and how their collective oversight shapes the success of CEO transitions, ensuring strategic alignment and long-term stability. 

Bibliography 

1. Gardner, John W. “On Leadership”.New York: Free Press, 1990. 
   • Provides the foundational distinctions between leadership and power, and insights into effective leadership practices that influence board dynamics. 
2. Cadbury, Adrian. “Corporate Governance and Chairmanship: A Personal View” Oxford University Press, 2002.
   • Offers insights into the role of the Chairman and the governance structure, emphasizing leadership responsibilities within boards. 
3. Burns, James MacGregor. “Leadership” New York: Harper & Row, 1978. 
   • Discusses the concepts of transformational and transactional leadership, applicable to the Chairman’s role in fostering board renewal and guiding strategic vision. 
4. Lorsch, Jay W., and Elizabeth MacIver. “Pawns or Potentates: The Reality of America’s Corporate Boards” Boston: Harvard Business School Press, 1989. 
   • Provides context on the power dynamics within corporate boards and the Chairman’s potential influence over CEO succession. 

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