The terms ‘Chairman’ or ‘Chairperson’ have not been defined in the Companies Act, 2013. This may be for the simple reason that this position is not restricted to companies. Anyone who presides over and manages the conduct of a meeting can be said to be ‘chairing’ it.
It just
assumes a tad higher importance in the company structure since most life decisions
of companies are initiated at board meetings, where the chairman or the
chairperson has a significant role to play.
The board of
directors (considered the head of the company) has to take collective decisions
based on collective wisdom of all members. In order to get a sense of the
direction where the collective wisdom leads and to address the issues of
self-interest and conflict of interest of individual board members in decision
making, a facilitator is required.
This is the
role a chairman will play. The prime role of a chairman is to preside over the
meetings, lead in various discussions, move the meeting according to the agenda
and maintain discipline in the meeting.
The primary
role of a Chairperson is to ensure that the board of directors is
effective in its principle goal, which is to set and implement the company’s
direction and strategy. Usually, the Chairperson is appointed by the
board itself, and can either be a full-time or part-time role, depending on the
board’s demands. Sometimes, usually in smaller companies, the role of
the Chairperson is combined with a managing director or chief
executive. Joint roles such as those are not recommended for public companies
that are listed on the Stock Exchange.
They are
expected to take the chair at both general meetings and board meetings.
For board meetings, this involves determining the order of the
agenda; ensuring the board receives accurate, timely, and clear information;
keeping track of the contributions of individual directors, ensuring they are
all equally involved in decision-making. Regardless of the meeting type,
the Chairperson should be directing discussions towards consensus
views and agreements and should be summing up discussions so that
everyone understands what has been agreed upon.
They are
expected to take a leading role in determining the composition and
structure of the board. This means regularly reviewing the overall size of the
board, the balance between executive and non-executive directors, as well as
the balance of age, gender, experience, and personality.
Finally, they
are expected to ensure effective and constructive communication with
shareholders and stakeholders.
While Chairperson, they are expected to act as the organization’s
leading representative. This involves the presentation of the company’s aims
and policies to potential clients or partners, and to the outside
world.
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