My goal to learn something new every day
During one of my one-to-one classes today, a student asked me what the word chairman (note on usage) meant. She had come across it in her student workbook and was unsure of the meaning. While I had a basic understanding of the duties of the role of a chairman in a corporation, it was one of those moments that while trying to explain it to my student (from a non-business background) I realised that I found it difficult to explain adequately (certainly not as good as I should have been able to seeing as how I spent most of my second year at university studying—I use the term lightly—corporate governance, company law and the like). I could see the student, who was high-intermediate, perhaps bordering on advanced, nodding politely, but not really getting it. I tried to give the example of Lee Gun-hee, known by all South Koreans, who is the chairman of the Samsung group. Unfortunately, that didn’t help much because while Koreans know who he is, not as many know exactly what he does at Samsung.
So, I thought it was the perfect opportunity today to learn about what a chairman is exactly, and how the role differs to that of a CEO, because to be honest, I wasn’t all that certain on the difference. Let’s start with the CEO.
This is a term that most (if not all) of my Korean students are familiar with, even if they don’t know what it stands for. The CEO is the chief executive of a company, and is usually the most senior executive officer of a company. His/her job involves managing the company, and making most of the key decisions. Of course every company differs, and the duties of a CEO will be different depending on the company. In the UK, the title managing director (MD) is more common, and is certainly the term that I was more familiar with before coming to Korea. The CEO of a company typically reports to the board of directors.
The board of directors of a company are a group of people who are either elected or appointed. Their job is to essentially govern the overall running of a corporation, and one of their duties include selecting a chief executive. The board of directors will usually set out the role of the CEO. Again, depending on the company, the election and duties of a board of directors will differ. In a large publicly traded company, for example, the board of directors will answer to the shareholders. The board of directors is led by a chairman, who is usually chosen from one of the members on the board of directors.
Because the chairman leads the board of directors, to whom the CEO reports, in most organizations, the position of chairman can be seen as superior to that of the CEO. Of course, in reality it’s not as black and white, and usually there are clearly defined roles for the CEO and chairman. The chairman typically doesn’t get involved with the day-to-day running of the business, but many of the major decisions that the CEO has to take often have to go through the board of directors. In some companies, although it appears to be fewer these days, the role of CEO and chairman are combined. For a real-life example, I found this very brief press release from the energy company Total, which says:
On October 22, 2014, following the recommendation of the Governance & Ethics Committee, the Board of Directors decided to separate the positions of Chairman of the Board of Directors and Chief Executive Officer and to name Thierry Desmarest Chairman of the Board of Directors. Prior to this date, Mr. Desmarest was a director and Honorary Chairman of Total.
The Board of Directors also named Patrick Pouyanné Chief Executive Officer of Total. Mr. Pouyanné became President of the Executive Committee of Total at the same time.
The Chairman of the Board of Directors organizes and oversees the work of Total’s Board of Directors and makes sure that Company’s Board and committees operate effectively, in line with good governance principles. He or she liaises between the Board of Directors and company shareholders. Each year the Chairman makes a report to the Annual Shareholders’ Meeting describing the preparation and organization of the Board of Directors’ work and the internal control procedures in place.
I think it is a good example of the role of a chairman in a large corporation.
While the explanation I’ve offered here leaves out an awful lot, I hope that with this better understanding of the distinction between a CEO and chairman, the next time I’m asked by a student, I’ll be able to give a more satisfactory, confident answer.
Chairman. (Back) While I am aware that using the word ‘chairman’ can be seen as sexist and that since the 1970s alternatives, such as chair and chairperson, have been suggested and used, I have continued to use ‘chairman’ in this post because that’s the way it was presented in the student’s book. In addition Oxford Dictionaries cites corpus data saying that ‘chairman’ is still used much more frequently than ‘chair’ or ‘chairperson’, and in searching the internet, I was able to find much more information with the search term ‘chairman’ as opposed to ‘chair’ or ‘chairperson’. By using the word ‘chairman’, I am not referring to only men who hold the role, but both men and women.