The chair acts as an important link between the board
and the organisation’s management via the CEO. The role
of the chair is not defined in the Corporations Act 2001,
thus many functions of the chair are customary rather than
formalised by law.
The chair is responsible for leadership of the board
- facilitating proper information flow to the board;
- facilitating the effective functioning of the board
including managing the conduct, frequency and length
of board meetings;
- communicating the views of the board, in conjunction
with the CEO, to the organisation’s security holders,
broader stakeholders and to the public.
In performing his/her role, the chair’s responsibilities
- In consultation with the CEO/company secretary:
- setting the agenda for the matters to be considered
by the board;
- seeking to ensure that the information provided
to the board is relevant, accurate, timely and
sufficient to keep the board appropriately informed
of the performance of the organisation and of any
developments that may have a material impact
on the organisation or its performance;
- seeking to ensure that communications with
stakeholders and the public are accurate and effective;
- Seeking to ensure that the board as a whole has the
opportunity to maintain adequate understanding of the
organisation’s financial position, strategic performance,
operations and affairs generally and the opportunities
and challenges facing the organisation;
- Facilitating open and constructive communications
amongst board members and encouraging their
contribution to board deliberations;
- Overseeing and facilitating board, committee and board
member evaluation reviews and succession planning;
- Liaising and interfacing with the CEO as the primary
contact between the board and management; and
- Liaising with and counselling, as appropriate,
Subject to the terms of the constitution, the chair is
appointed by the board from amongst its members and
holds office at the discretion of the board until removed
from office by the board or until the chair resigns from
office or is no longer a board member.
In the absence of the chair, the deputy chair (if there is one
appointed by the board) or the senior or lead independent
director, should assume the role that otherwise would be
performed by the chair if the chair was not absent.
What is the role inside the boardroom?
- Acting as an important link between the board and
management but without necessarily preventing
direct access of fellow directors;
- Establishing and maintaining an effective working
relationship with the CEO;
- Setting the tone for the board, including the
establishment of a common purpose;
- Chairing board meetings efficiently and shaping
the agenda in relation to goals, strategy, budget
and executive performance;
- Obtaining appropriate information to present
to the board;
- Encouraging contributions by all board members
and seeking consensus when making decisions;
- Motivating board members and where appropriate
dealing with underperformance;
- Overseeing the process for appraising board
members individually and the board as a whole;
- Overseeing negotiations for the CEO’s employment
and evaluating the CEO’s performance;
- Planning for CEO succession;
- Assisting with the selection of board
What is the role outside the boardroom?
- Communicating with shareholders and members
on behalf of the board and on matters of
- Chairing shareholder or member meetings – annual
and extraordinary general meetings (AGMs and EGMs);
- Increasingly, being available to speak with institutional
investors and significant stakeholders.
What happens when a chair does not
A chair can only be effective while he or she retains
the confidence and respect of their fellow board members.
An underperforming chair may be asked to step down by
other directors (or be required to step down by resolution
of the board unless the chair is appointed directly by the
organisation’s members or perhaps a government minister
in the case of a public sector organisation) but, in respect
of most organisations, can only be removed as a director
from the board by a vote of shareholders or members.
Should the chair be independent?
Accepted good corporate governance practice in Australia
(like in many other countries of the world) recommends
that the chair should be an independent director, although
there are differing schools of thought on this topic,
for example, in USA where the concept of a combined
chair/CEO continues to have reasonable appeal.
This means that the chair is free from potentially
conflicting relationships with the organisation
– for example, being an executive or professional
adviser within the last few years, being a substantial
shareholder or supplier, and having no material
contractual relationships with the organisation
Australian good corporate governance practice also
recommends that, where the chair is not an independent
director, it may be beneficial to consider the appointment
of a lead independent director. This person can act
as a conduit for any material issues that independent
directors on the board may wish to raise with the CEO
or executive management team.
For more information, see the ASX Corporate Governance
Council’s Corporate Governance Principles and
Recommendations 3e (2014), Recommendation 2.5.
“Australian good corporate governance
practice also recommends that,
where the chair is not an independent
director, it may be beneficial to
consider the appointment of a lead
What are important personal traits for a chair?
A balance of desirable personal traits for a chair include:
- tact, diplomacy and sensitivity
- ability to reconcile opposing views
- strength and clarity of purpose
- ability to lead including by example
- ability to encourage and get the best from all
- power to influence.
Is a chair held to a higher standard or does
a chair have additional responsibilities to those
of a “mere” director?
Court cases have created debate on the role and
responsibilities of the chair. Public scrutiny of the role
of the chair increased due to corporate collapses like
One. Tel and HIH. The resulting court decisions suggest that
there is an argument that the chair’s role is one that at least
carries additional responsibilities, although whether or not
this means the chair is held to a “higher” standard of duty
and responsibility is moot. ASIC has argued that the chair
has responsibilities beyond those of other directors at least
in the following respects:
- general performance of the board
- flow of financial information to the board
- establishment and maintenance of systems
for information flow to the board
- public announcement of information
- making recommendations to the board as to prudent
management of the group.
So far there is no legally binding precedent and the
question awaits a definitive answer from the courts
Deputy chair (or senior independent director
if a deputy chair is not formally appointed)
The deputy chair (if one is appointed), or the senior
independent director if a deputy chair is not formally
appointed, has the following responsibilities:
- To perform the role and functions of the chair
in the absence of the chair for any reason.
- To be available to facilitate the following matters
when and as appropriate and required:
- chair succession planning;
- approvals and actions required to be performed
by the chair under this charter, or its policies, where
the chair actually or potentially may be compromised
due to personal or other conflict of interest.
- At the request of the chair, to support the chair
in the performance of the role and function of the chair.
As with the chair, accepted good corporate governance
practice recommends the deputy chair should
be an independent non-executive board member
and should not also be the CEO.
This document is part of a Director Tools series prepared by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a
starting point for undertaking a board-related activity. It is not designed to replace legal advice or a detailed review of the subject matter. The material in this document does not constitute
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