The Role of the Chairman

Eng. Abdullah bin Awda Al-Ghabin

Introduction to Good Governance…

Over the past 50 years, several global corporate CEOs have emerged as symbols of leadership and influence in their industries. These leaders have not only left their mark on their companies but have also helped shape business practices and governance.

Among these figures, Jack Welch, Executive Chairman of General Electric from 1981 to 2001, is considered one of the most prominent. Welch was known for his strict management style, leading the company to tremendous growth, increasing its value from $12 billion to nearly $500 billion. He introduced concepts such as “operational excellence” and “market leadership,” which helped GE achieve significant profits and strengthen its position as a major competitor.

On the other hand, Warren Buffett, who is considered one of the greatest investors in history, has served as Chairman of Berkshire Hathaway since 1970, where he is known for his unique investment strategies and philanthropy, becoming a symbol of success and commitment to ethical principles in the world of finance.

Tim Cook took over as Apple CEO from Steve Jobs in 2011. Although he is best known as CEO, he also served as chairman. Cook led Apple to unprecedented growth and innovation, making it one of the most valuable companies in the world. Larry Page, founder of Google, and Mary Barra, the first woman to serve as executive chairman of General Motors, represent a new generation of board chairmen who are helping to shape the future of industries. Page helped develop new technologies, while Barra led GM’s transformation toward sustainability.

The chairman of the board plays a vital role in directing the company. His duties include developing strategy and setting long-term goals in collaboration with the board and executive management, organizing effective board meetings, and serving as a liaison between the board and executive management. He also monitors overall performance and analyzes financial results, participates in the hiring and evaluation processes of executives, and enhances governance to ensure adherence to best practices. 

The qualities that distinguish a successful board chairman include a clear strategic vision, leadership skills, decision-making ability, and a deep understanding of the industry. Successful board chairs also have flexibility and the ability to manage crises, which helps them steer their companies towards success and sustainability.

Leadership and management are vital elements that determine the success of companies around the world.

Interestingly, the leadership style of board chairmen differs significantly between Japan, America, and Britain, due to the cultural, structural, and economic factors that affect each country. In Japan, leaders tend to adopt a collective leadership style, where decision-making is a participatory process, and the focus is on building consensus and avoiding conflict, reflecting the prevailing collective culture.

In contrast, American leaders are characterized by quick decision-making, as they focus on achieving short-term goals, and individual success and appreciation of personal performance are considered core values. In Britain, leaders combine participation with individual decisions, while taking into account tradition and reputation.

The strategies of board chairmen also vary between these countries. In Japan, the focus is on sustainability and building long-term relationships with partners, while avoiding high risks, while Americans prefer innovative thinking and rapid growth strategies, making them more tolerant of risk. In Britain, strategies tend to be more conservative, with an emphasis on balancing innovation and stability.

Transparency and accountability are core values ​​of American companies, with detailed financial reporting. In contrast, levels of transparency in Japan may be lower, with information being treated more conservatively and a focus on personal relationships preferred, while in Britain, transparency is important, but there is also an appreciation for tradition and privacy in some cases.

Leadership styles and organizational culture vary between Japanese, American and British board chairmen, affecting how companies are managed, and decisions are made. These differences reflect the cultural and social values ​​of each country, which contribute to shaping the work environment and success of companies in today’s world.

One person can serve as both chairman and CEO of U.S. public companies. However, this practice has been the subject of debate and controversy regarding corporate governance, with some investors and governance advocates arguing that having one person in both roles can lead to a concentration of power, reducing the board’s ability to provide effective oversight.

Many institutional investors favor separating the roles to enhance accountability and ensure that the board can effectively challenge the CEO’s decisions. While the SEC does not prohibit this practice, it does require companies to disclose their governance structures, including whether the roles are combined or separate.

The Saudi Capital Market Authority’s Corporate Governance Regulations separate the supervisory role of the chairman from the executive roles while he or she is chairing the board, and if the CEO is the chairman, he or she may not be appointed chairman of the company’s board during the first year of his or her term. This measure reflects companies’ commitment to enhancing governance and accountability, which is an important step toward achieving sustainability and success in a competitive business environment.

In the context of enhancing corporate governance, this regulation has defined the duties of the Chairman of the Board of Directors and Board Members to play a vital role in guiding companies. According to Article 26 thereof, the Chairman of the Board of Directors shall lead the Board and supervise the workflow, which requires him to perform his duties effectively and efficiently.

The duties of the Chairman of the Board of Directors according to this article include ensuring that members receive complete, clear and non-misleading information in a timely manner, which enhances the Board's ability to discuss key issues effectively. The Chairman of the Board also represents the company before external parties, which requires compliance with the provisions of the Companies Law and its executive regulations.

The regulation stressed that it is also necessary for the Chairman of the Board of Directors to encourage members to perform their duties in the best interests of the company, and to work on building effective communication channels with shareholders to convey their opinions to the Board. He must also enhance constructive relations and effective participation between the Board and Executive Management, which contributes to creating a culture that encourages constructive criticism.

In addition, the Chairman of the Board of Directors shall prepare the agenda for the meetings, considering the issues raised by the members or auditors, and consulting with the CEO when preparing the agenda. He shall hold periodic meetings with non-executive members without the presence of any executive officer, to ensure open and transparent discussion.

Finally, the Chairman of the Board of Directors shall be aware of the importance and size of the role assigned to him as the head of the company’s pyramid and its first official, and shall be distinguished by a leadership spirit that balances the interests of shareholders and develops their wealth, and enables the members of the Board of Directors to perform their roles in a team spirit.

He shall also constantly direct the executive management, monitor the performance of senior executives, enhance their self-confidence, and empower them by all systematic means to achieve the company’s objectives.