Defining the lead director role

View points

Governance


In the aftermath of a number of corporate scandals, the New York Stock Exchange established a new position six years ago to foster greater transparency and accountability among senior leadership. The new role, lead director, offers an alternative to splitting the combined chairman-CEO role. The lead director serves as an independent chief among all board members and thereby helps ensure board relations run smoothly. But since the introduction of the new position to corporate America, there’s been little consensus regarding the responsibilities a lead director should assume. A recent survey sheds light on lead directors, having found that they excel in improving board performance, in strengthening relationships with the CEO, and in providing leadership in crisis.1

Lead directors drive high-performance boards. Many lead directors improve board performance by facilitating board discussions, by helping directors reach consensus, and by keeping board matters on track. In fact, all of the lead directors surveyed said they had the authority to call executive sessions and to preside over them. They may help deal with difficult or underperforming directors as well—a task that has traditionally fallen to the chairman or CEO.

Lead directors by the numbers

Possibly the most important contribution is lead directors’ dialogue with CEOs about substantive business matters or governance issues. A majority of lead directors said they speak with CEOs more than five times between board meetings. That’s much more often than they speak with other directors. Relations between CEOs and boards can be rocky, and lead directors help maintain open communication across the boardroom. And with half of lead directors serving as former CEOs, it’s no surprise that they have the capability to build productive relationships between the board and CEOs.

Past leadership expertise comes in handy—especially during a crisis. Seasoned leadership experience equips these directors to collaborate with CEOs and offer new perspectives in times of trouble. In fact, 73 percent of lead directors have had active roles in managing crises during the past three years.

As companies gain more experience and feel higher levels of comfort with lead directors, lead directors’ roles are likely to continue to evolve. Nevertheless, the lead director role has proved to be successful for most, with 65 percent saying their positions have provided significant benefit for their companies.


1 PwC, Lead directors: A study of their growing influence and importance, April 2010.
73%
of lead directors have had active roles in managing crises during the past three years.