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Musical Chairs
“You can’t have a high-performing company without a high-performing board. That starts with the chairman,” said Alan Kaplan, CEO and founder of Kaplan Partners, in a September Bank Director article.
Bank chairs play an important role by presiding over board meetings and fostering productive dialogue among board members. And who holds that spot can be controversial, with proxy advisors and shareholder activists often advocating for separating the CEO and chair positions.
Dividing the two roles can be a mark of an independent board, but that’s not the full story. Boards could also consider how long the chair has held that position — and whether that person is effective at the job.
Tenure can be a double-edged sword. According to the 2024 U.S. Spencer Stuart Board Index — the consulting firm’s annual analysis of S&P 500 boards, including financial firms — the average tenure of an independent chair has increased over the past decade, from 4 years in 2014 to 5.3 years in 2024.
Experience can prove valuable in a boardroom, but complacency can impede oversight. “Just like a board seat should not be a Supreme Court appointment, why would a committee chair, or board chair seat, be a lifetime appointment?” Kaplan asks. “At a minimum, I think there should be a reelection, a reaffirmation of a board chair every three years.” He says the practice, which would include a formal evaluation, can also help curb outsized influence from a long-tenured, powerful chair who holds too much sway over the board and executive team.
That reaffirmation could result in greater accountability for the chair and more churn in that key position. Some boards make it a practice to rotate committee chairs. Why not the board chair? “Different leaders run boards differently,” Kaplan says. “Relationships change; CEOs change.”
It’s a tough job with a higher level of responsibility, though, so finding the right skills among current directors could prove difficult. But who serves as chair shouldn’t be based on time served. Kaplan says some boards default to the longest tenured board member — even if that individual isn’t the best qualified for the role.
“You don't want to institutionalize any roles; that’s not a best practice in governance,” Kaplan says. “Refreshing the chair can be beneficial and avoids feeling like the chairman is calling the shots.”
• Emily McCormick, vice president of editorial & research for Bank Director
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