The importance of an Independent Chair

There is a constant debate in corporate governance around the importance of an independent Chair of a Board, and the benefits that the turnover of the Chair brings. The recent example of two directors resigning over their Chair’s tenure is just the iteration of this ever-lasting debate. So, what is the issue?

What is a Chair of a Board?

The Chair of a Board is more than just someone who ensure meetings operate to time and follow the  agenda. They play a significant role in a Company’s strategic direction, ensuring the corporate governance structures of a Company are fit for purpose, and acting as a key liaison between the Executive team and the Company’s shareholders.

The UK Corporate Governance Code suggests that the Chair of the Board should have another important characteristic – they “should be independent on appointment.The Code sets out a number of criteria that stipulates what it means as independent, including:

  • Has not been an employee of the Company in the last five years, including as the Chief Executive
  • Does not receive additional pay or remuneration from the Company outside of their role as a Director
  • Has served on the Board for more than nine years from their first appointment.

Appointment of the Independent Chair

For the Board to be effectively governed, usually the Chair should be an independent Non-Executive Director that is able to offer a level of external and objective thought and constructive criticism to a Company. An independent Chair can bring confidence to shareholders that the Company is willing to look outside of its own number to progress and to ensure that its governance structures are robust and effective. It allows the Board to carry out its function of monitoring the management of the Company and the Executive on behalf of the shareholders.

Exceptions to the Rule

Whilst it is good practice for Independent Non-Executive Directors to be the Chair of a Company and to be refreshed at least every nine years, there are provisions in place that would allow for a Chair to continue to be a director past the nine-year limit, or to be a former employee of a Company.

It can be acceptable for former CEO to join the Board to allow for continuity and expertise in a time of transition for a Company. In such a case, the Code recommends that the Board consults the major shareholders and publish its reasons.  The nine-year limit for a Chair can also be extended to ensure there is an effective transition between Chairs.

For more, Contact MSP 


1707 2560 MSP Org
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