Chairman

Definition

The Chairman, also known as chairwoman, chairperson, or simply chair, is the most senior officer of a company. The chairman presides over the *annual general meeting of the company and typically over board meetings. They may either play an active executive role or serve a primarily ceremonial function, depending on the company’s structure and size.

In small companies where the chairman holds the majority of shares, they might also carry the title of managing director, undertaking substantial executive responsibilities. In contrast, larger companies might see a retired managing director or an external figure appointed as chairman with no direct involvement in daily operations. In the USA, this role is often referred to as the president.

Examples

1. Jeff Bezos at Amazon: Initially, Jeff Bezos served as both CEO and Chairman of Amazon. In February 2021, he announced plans to step down as CEO while retaining the chairman role, a move similar to what other founders have done.
2. Bill Gates at Microsoft: After serving many years as CEO, Bill Gates transitioned to the role of chairman, where he played a significant yet non-executive role until stepping down in 2014.
3. Warren Buffett at Berkshire Hathaway: Warren Buffett fulfills both the chairman and CEO roles, demonstrating a hands-on approach in leading the company.

Frequently Asked Questions

1. What is the role of a chairman?

• The chairman presides over board meetings and the annual general meeting, offering leadership and ensuring effective governing of the company. Their involvement in daily activities can vary greatly.

2. Can the chairman and CEO be the same person?

• Yes, especially in smaller companies, one person can hold both positions. It’s less common in larger firms due to governance and checks and balances.

3. How is a chairman selected?

• The chairman is usually elected by the board of directors or shareholders during the annual general meeting.

4. Is a chairman’s role primarily executive or non-executive?

• It depends on the company. In many cases, the role is primarily non-executive, especially if the chairman is a retired managing director or outside figure.

5. What distinguishes a chairman in the USA from other countries?

• In the USA, the term “president” is often used interchangeably with chairman, though some companies might have both roles with specified responsibilities.

Related Terms

• Annual General Meeting (AGM): A yearly gathering of a company’s interested shareholders wherein they get necessary updates on company performance and elect the board of directors.
• Board of Directors: A group of individuals elected to represent shareholders and oversee the activities and decisions of a company.
• CEO (Chief Executive Officer): The highest-ranking executive in a company, responsible for overall management and decision-making.
• President (USA context): In some U.S. companies, this term is synonymous with CEO or chairman but can also imply a distinct role in varying contexts.

Online References

1. Investopedia’s article on Chairman
2. The CFA Institute’s overview on Corporate Governance
3. Wikipedia’s entry on Chairman

Suggested Books

1. “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker.
2. “Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way” by Ram Charan, Dennis Carey, and Michael Useem.
3. “The Board of Directors and Audit Committee Guide to Fiduciary Responsibilities” by Sheila Moran.

Accounting Basics: “Chairman” Fundamentals Quiz

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