VIDEO: How Do You Select a New Board Chair?

In our continuing series, Corporate Governance Expert David Beatty offers insights how to select a new board chair.

How Do You Select a New Board Chair?

David R. Beatty: Changing the chairman of the board is a very challenging arena for corporate boards. A vital decision because if you get a less than happy chair, you're going to have to be probably resigning as a director because you're going to be severely impeded in your ability to be effective.

Selecting the chair then. How do you do that in a way that's responsible and yet, will give good candidates the way forward? There's no true answer. I can tell you at one of the boards I was on, we went around the board room table and said, "Who have you under no circumstances want to be chairman of the board?" The hands went up and we said, "Right, you're now the committee of the board in charge of selecting the next chair," and that worked reasonably well because there were enough of us that there was a wide diversity of views and over time, we paired it down to two candidates, sat on it for another three or four days, and picked one, and that person turned out to be wonderful.

There are other ways of doing it, including having succession planning so that maybe the head of your audit committee is there, maybe the head of the HR committee is a candidate, and maybe even when you select a new director from outside, you put down, "Has this person shared a board of any kind before so I've got a new candidate, new potential?"

You get this wrong and you are going to be severely, severely impeded as a director able to add value. I actually resigned from one board publicly-listed in the United States where the chairman refused to make changes that would make the board operationally effective on matters of strategy and value creation, so it's a pretty profound decision, and it's one the board makes all by itself. It's solely and uniquely responsible for selecting the next chair, so do it carefully.

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David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.