Summary of Full Article
Distrust occurred when corporate boards were charged with offenses which demonstrated that excellence in corporate governance was not the practice. Part of the issue related to the combined role of Chair of the Board and CEO. The best practice arising out of the analysis of these situations is either to split the roles or add a role called ‘lead director.’ The full article: addresses what a lead director is and is not; outlines how the role came about; provides examples of role descriptions; delineates the critical characteristics of a lead director; draws attention to areas outside that role; and briefly addresses the issue of compensation for that role. For full article click here.
What is a Lead Director?
The lead director is one appointed or elected by board members when the Chairperson of the Board and the CEO are the same person.
How did this role arise?
It appears as if the need arose when growing public distrust of management and board “insiders” was expressed after exposure of a series of multibillion-dollar financial debacles such as Enron Corp. and WorldCom Inc.
There is a potential for conflict when the chairperson and CEO are the same person. Some of the questions which are difficult to answer or which may go unaddressed include:
- Who reports to whom?
- How does the separation of governance and management occur?
- How does the board separate the evaluation of CEO from the evaluation of the chairperson (a person could be a competent CEO and not a competent chairperson or vice versa)?
The Lead Director has 17 duties
The full list can be found in the full article. More specifically, three of the duties are;
- Ensures that when the board is considering any issue it is given all of the options with the pros and cons
- Ensures the board considers all options and is not railroaded to accept any particular one, and
- Helps the board move toward consensus.
Samples of role descriptions
Follow these links to access three samples on the internet
- Pepsiamericas
- Agenda – Responsibilities for Lead Directors Go Beyond Chairing Executive Sessions
- Accenture
The Critical Characteristics of a Lead Director
This author contends that the best lead director has all of the characteristics outlined in the article Getting and Keeping the Job as Board Chair: The Traits to Nurture.
During a webinar with the NACD the speakers outlined 9 key characteristics:
- independence
- stature and sound judgement
- forward-looking acumen
- Relationship building and communications
- Experience and leadership maturity
- Time commitment and availability
- Ability to build consensus
- Integrity and is respected
- Has time to fulfill the role
Who chooses the lead director?
That person is selected by the independent directors on the board. .
Is the lead director compensated for the duties associated with the role?
There is no consensus around this issue. Many boards are providing a slightly-higher stipend to the lead director.
