The Role of the Executive Chair

In brief: NACD defines the executive chair role as a temporary position fulfilled by the former combined CEO/chair who has relinquished the CEO title while remaining board chair and onboarding an incoming CEO. Creating this role is not standard practice for a CEO transition, with only 3 percent of respondents to the 2016–2017 NACD Public Company Governance Survey utilizing the role. However, the board may consider installing an executive chair, should the company be undergoing a period of stress or unique circumstances in which the incoming CEO needs additional guidance.

The focus on the board’s compensation committee has never been sharper. The components of compensation plans and the link between compensation and company performance are under intense scrutiny from shareholders, employees, policymakers, the media, and other stakeholders. The Report of the NACD Blue Ribbon Commission on the Compensation Committee revisits NACD’s 2003 Report of the NACD Blue Ribbon Commission on Executive Compensation to highlight the new environment in which compensation committees—and, more broadly, boards—are now operating. It recommends that the compensation committee and board work together to establish an executive compensation philosophy that supports the company in creating long-term, sustainable value.

The report includes ten specific recommendations for compensation committees to consider when evaluating their compensation philosophies. It also provides practical tools, such as sample compensation committee charters, a compensation committee assessment, and guidance on executive employment contracts.