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Background

Strong, successful private businesses are the bedrock of the Irish economy. They provide value for their shareholders, their workforces and for wider society. The conduct and governance of private companies has a significant impact on the interests of employees, suppliers and customers. Good corporate governance provides confidence to key stakeholders that a company is being well run.

Good corporate governance starts at the top. The chairperson leads the company and sets the tone for the entire organisation. An effective chairperson ensures that the private company operates with a clear sense of purpose and collective vision and that its core values and culture are lived on a daily basis.

We have set out the ten key principles which the chairperson of a private company should apply. These principles are informed by the leading thinking in the area of corporate governance and by our own experiences of working side by side with Irish private business every day.

Good business, done well, is a positive force in society. These principles equip the chairperson with some of the tools they need to make this goal a reality.

Key principles for chairpersons

  1. Lead by example: The chairperson should act with integrity and lead by example, setting the tone from the top of the company. The chairperson should build positive relationships with all stakeholders through regular engagement, particularly the workforce. The chairperson should dedicate sufficient time to the role to ensure they can properly discharge their duties.
  2. Role of chairperson: The role of the chairperson should be clearly established and set out in writing. The chairperson leads the board and is responsible for its overall effectiveness, promoting open debate and facilitating constructive discussion. The chairperson should ensure that all directors have appropriate information and sufficient time is made available for meaningful discussion and should set the agenda for board and shareholder meetings. The chairperson should ensure that the board as a whole has a clear understanding of the views of shareholders.
  3. Separation of roles of chairperson and CEO: Consideration should be given to separating the roles of the chairperson of the board and the CEO. This will ensure a balance of power and promote effective decision making. From a governance perspective ideally the chairperson and the CEO should be independent of each other. The division of responsibilities between them should be clearly established.
  4. Maintaining objectivity: The closely held nature of ownership within many private companies means that directors are often required to maintain objectivity in complex situations, in particular where there is an influential shareholder or where the chairperson has a relationship with the CEO.
  5. Professional development: The chairperson should demonstrate a commitment to the ongoing professional development of the board. 
  6. Board evaluation: The chairperson should ensure that regular evaluation of board performance (including the role of the chairperson) is undertaken. The chairperson should act on the recommendations of such evaluations and ensure that board members undertake appropriate training to update continually update their skills. This may lead to board refreshment or succession planning. 
  7. Accountability: An effective board should establish and maintain corporate governance practices that provide clear lines of accountability and responsibility to support effective decision making. The chairperson and the company secretary should periodically review the governance processes to ensure that they remain fit for purpose and consider any initiatives which could strengthen the governance of the company. 
  8. Conflicts of interest: Conflicts of interest can arise and compromise objective decision making. In such cases the Board should agree and set out how such conflicts should be identified and managed. This is of particular relevance in circumstances where there is a familial relationship between the chairperson or other board members and the CEO or other members of senior management. In family businesses the chairperson needs to differentiate between family matters (continuity, valuation, liquidity, transmission, dividends etc.) and corporate matters (operation-related decisions). 
  9. Tenure: From a governance perspective ideally the chairperson should not remain in post beyond nine years from the date of their first appointment to the board. 
  10. Board committees: If the board establishes an audit committee, the chairperson should not be a member of it. If the board establishes a remuneration committee, the chairperson should not be a member of it unless they were independent of the company upon appointment and the chairperson cannot chair the remuneration committee.