Much has been written about the responsibility of the non-executive chairman of a company and that of non-executive directors. These posts should not be equated since these are not similar in any respect, although the fees are the same. The non-executive chairman is a far more important person than an ordinary non-executive director in the company. Usually, the former is the de facto family head who, having established the company, hands over the day-to-day administration to grown up sons. He still remains the owner of substantial shares of the company and the managing director or executive directors dare not disobey him. He has a room in the office, usually the best room or the boardroom, for his use whenever he comes, which is quite often. He summons people of the highest rank to explain important matters to him. If there is any serious anomaly in the running of the company, he points this out to the senior executives. He, after all, chairs all board meetings and, above all, the annual general meeting where hundreds of questions are asked of him by shareholders to which he has to reply. He has to know practically everything to be able to reply to such questions. Only a credulous person will believe that he knows everything except the risk factor in the company!
Even if the non-executive chairman is not the family head, he is surely a businessperson who knows where the problems and risks of the company lie. He has a special position which is in no way comparable to the ones held by ordinary directors. He has access to all the facilities mentioned above and he has the power to summon the managing director or other senior officers to rectify any defects. Usually, experts are called in for reports on various aspects of the company, a priority being risk analysis. If the non-executive chairman wants such a risk analysis, there is no way a managing director can veto him.
Having been an independent director in several companies for one-and-a-half decades, I am convinced that equating the non-executive chairman with an ordinary director is only a plea to whittle down the responsibility of the former.
Sukumar Mukhopadhyay, New Delhi
