Introduction

In the UK over 90 per cent of listed companies split the roles of Chairman and Chief Executive, whereas in the US the reverse is true. It is said that in the US a Chief Executive's vanity is hurt if he or she is not also the Chairman. A number of Chief Executives in the UK might feel this way, and arguably, for successful companies that can avoid rough water, it might be feasible for a gifted person to combine the two roles effectively. More than one Chairman told me that if the company's strategy and management are good, the job is easy. However, I firmly believe that the conventional wisdom that there are two distinct roles – running the board and managing the business – is sound.

The Chairman is properly seen as one of the checks and balances on the authority of the Chief Executive. This does not always work in practice. For example, Enron (although a US company) had separate Chairman and Chief Executive. Astonishingly, Hewlett Packard reacted to its boardroom debacle by appointing its Chief Executive to be Chairman.

Another argument for separating the roles is the additional responsibilities created by all the corporate governance requirements that have been imposed. Better to let the Chairman, assisted by his Company Secretary, deal with ‘all the compliance stuff’ than distract the Chief Executive from his operational duties.

This book is not intended to be another handbook or primer on corporate governance. Although readers will find chapters, such as those by Charles Mayo and Stilpon Nestor, that describe recent developments in laws and regulations, the main purpose of the book is to describe corporate governance in practice from the viewpoints of the principal players, including the board of directors, the regulator and the investor. Contributors have focused on the benefits of good governance and a number have written about events and their own experiences that demonstrate governance in action: both positive and negative examples.

I hope that the book will appeal not only to lawyers but also to those working in listed companies. Those who are directors may identify with the views of Sir Geoffrey Owen and many of the Chairmen I interviewed who believe that boards are becoming more professional. The role of director, whether executive or non-executive, can no longer be considered simply as a promotion for a successful senior manager or a reward for doing a good job running another business. Being a director is a job in its own right that demands specific skills and individual qualities. Aspiring directors will gain an appreciation of the value of good governance for their business and should understand the importance of high-performance effective boards for corporate success. Colin Melvin and Hans-Christoph Hirt from Hermes Investment Management have written about the academic and professional studies that show that good governance leads to improved corporate performance.