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Fire the chairman, fire the board

meeting, business, boardroom, companyThere are various interpretations of a chairman’s role and The Institute of Directors include the following:

  • Providing leadership to the board;
  • Taking responsibility for the board’s composition and development; and
  • Ensuring the board focuses on its key tasks.

The performance of the company is the ultimate indicator as to whether the chairman is performing his duty (I use ‘his’ since ‘chairman’ is masculine – no disrespect to female chair people).

The appointment of a chairman is the responsibility of the board, and similarly the removal of the chairman is a board decision.

There is one terrible flaw in this system – what if one or more of the directors are toxic? This becomes the quintessential catch 22 situation. The board has a cosy relationship with the chairman and vice versa. Why should anyone make waves?

This leads to the next logical question – can the board be fired? The short answer is ‘yes’. The shareholders can fire the board. It doesn’t often happen, because a shareholder activist is required – usually a large shareholder who will lead the charge. But it needn’t be a large shareholder. A small shareholder activist can put this to a shareholder vote.

Shareholders are reluctant to fire boards. It leaves a vacuum, and there had better be a plan to replace those departed. Of course, most of the board can be fired, leaving a competent few to replace their fallen colleagues. But as with so many things in life, one lives in hope. Better the devil you know than the one you don’t.

The other person who can lead the charge is the CEO. If he can rally support from a majority of directors, he can say ‘goodbye’ to the chairman. A failed attempt will probably mean the end of the CEO, but if his job is untenable anyway, he hasn’t much to lose. In fact, he has much to gain because he can surround himself with non-toxic directors and a non-toxic chairman.

As with politics, this is the dirty side of the game and there needs to be covert negotiations. Inevitably, heads will roll, and it may be the ‘wrong’ ones.

Has it got to the stage where most, or all, directors working for a large public retailer should go? No prizes for identifying one such retailer. One simply has to look at past performance over a period and the scythe will be out.

Monty Python’s ‘bring out your dead’ wagonload of corpses will be overloaded.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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