What should a CEO expect from a top class chairman


What really makes a great Chairman of a PE-backed business?

3 minute read

Mediator

A top class Chairman needs to be a skilled negotiator whilst holding a position of neutrality.  But, this neutrality must come with a twist.

Adam Sullivan, CEO of Baywater Healthcare and PEPTalks Founder Member, advises you to ask yourself what side of the line your Chairman sits on.  If you have the Private Equity House on one side and Management on the other, a first class Chairman will need to sit in the middle, but with the flexibility to adapt to different situations.  “Sometimes the Chairman will need to be more supportive to management, sometimes to investors.”

As, Christian Nellemann, Founder and CEO of XLN, and PEPTalks Founder Member warns:

“A Chairman cannot be in the pocket of the PE House.  A Chairman has to be solid – with real integrity and real character as their job is to caretake the business and bridge the gap between the PE house and management.”

Adam Sullivan again:  “Being a CEO in a PE world can be isolating, so having a Chairman who can give good counsel, who can protect you better than anyone else, who can ensure that management is always on the front foot when engaging with the board, is crucial.”

And this is the nub.  Time is neutral, but it does not change things.  A Chairman’s key line of duty is to create change; to propel the business to where the CEO and PE house want it to go.  And to get the business there, your Chairman needs to have an understanding of all the issues, from all perspectives.  His stance needs to be an objective one, but one that will benefit both sides of the line.

Educator

“A Chairman is someone I can learn from.”

A CEO is often at the edge of his experience, staring into the unknown.  A top class Chairman must always be a mentor.  A sounding board.  A relentless educator.

As Christian Nellemann puts it: “I need a Chairman who has been a mile further down the same road, five times.”

Adam Sullivan:  “I want someone who is going to keep management pushed – someone who can be relentless.  Someone who is supportive, yet sometimes unbearably challenging. This is the difference between Private Equity and Corporate life.

Chemistry

So what if you don’t actually need a Chairman?  You have your PE house – a Chairman is surplus to necessity, obsolete even.

It may be prudent to listen to Richard Cotter, Non-Executive Chairman, Jack Wolfskin, & PEPTalks Founder Member:

“Anyone who has gone into a PE house as a CEO, who walks in on Day One saying, ‘I don’t really need a Chair’ – I guarantee that inside six months they will be saying ‘this is a fantastic asset to have’.”

CEOs learn quickly the value of a Chairman who can play a crucial role in the relationship with a PE house, as Richard Cotter reveals: “I would often use my Chairman to deliver messages to the PE house that I didn’t want to deliver myself.  Seeds can be sown prior to board meetings, removing any hostility and reducing the inevitable friction.”

And with this critical expectation, what characteristic is prized as vital? Chemistry.

If you can’t talk to an equity house about some of the issues you are facing – because they are your shareholders – you need to be able to sit down with someone with whom you’ve built a strong, confidential relationship, a trusted sounding board, someone you can have an open discussion with.  And for that you need chemistry.

Richard Cotter again; “You need really strong chemistry between the CEO and the Chairman. You find a lot of Chairmen with different, yet compelling attributes born from various functional expertise.  But for me, the most important quality is chemistry – trust and confidence.  That is more valuable than anything. That ability to provide an incisive view of whatever you are wrestling with at the time, will only happen if the chemistry is right.”