Here we highlight an experienced operator's views on the role of a non-exec chairman.
Gary Ward is a CEO with the scars and successes of having worked with a number of Private Equity Houses. Gary started life as a Finance Director at Granada Group and then Dairy Crest before getting backing from 3i to acquire First Motorway Services and subsequently leading the MBO of ETI backed by Hermes Private Equity. Both of these were exited in very different ways and Gary now acts as a Non-Exec for a number of different businesses.
"Everyone can quote the role its aims and objectives and what characteristics they require from the individual to fulfil this role, its textbook stuff.
But what are the motivations of the interested parties appointing the Chairman and how do the executive teams and CEOs feel about it? Chemistry and an experience balance are important both for the operational team and the make-up of the Board itself.
Having served under many Chairmen in my time across Plc’s, Public Sector and Private Equity backed companies, I have experienced situations where the Chairman has added great value to the team and the business.
Many SME businesses that Private Equity invest in have key individuals who have built up their businesses with a small team and are not used to the formal reporting requirements that new investors require.
They can therefore be overwhelmed or put on the defensive when faced with a Board Meeting which includes a Chairman and non-exec directors who are unknown quantities. Making sure a "them and us" division does not develop in the early days is an important part of the Chairman’s role.
Within the private equity backed sector no one cap fits all. The team and the requirements of the business can differ tremendously with strong characters on both sides, often their ego’s just cannot stop themselves from spilling out onto the table.
There is necessarily a strong emphasis on financial knowhow in private equity backed business with a predominance of Chartered Accountants within the private equity houses and also among what I will call careerist non-exec Chairmen.
I have, as CEO, sat at a table where, including myself, there where five current or ex accountants and only two non-accountants at the table! This can lead to an imbalance, pardon the pun, in the discussion around the table, it can be daunting and can alienate the other members of the Board.
One Chairman who was not an accountant but from the Investment house itself had a clear view of what he wanted from the accountants and did not dwell very long on the numbers but was clearly focused on a growth strategy for the business and roll out plan. He would actually dismiss the Finance Director from the meeting after they had presented their piece, the very nerve of the man! The term strategic thinker is often over used but this man embodied it, he was good.
Having said that, I served under two Chairmen that were accountants previously, in senior financial roles within large plc businesses, who both took time out to understand the business and make themselves approachable. One of who's experience proved invaluable when a further round of investment was needed for a building project that was underway at the same time as the bank decided it strategically didn’t want any more exposure in the sector. He was a calming influence on everyone; fair and trusted by all parties.
The right Chairman for the team and the business can add so much if all the shareholders invest the time to get it right."