The departure of a visionary founder or a highly successful, long-tenured CEO is a pivotal moment for any organization. It’s a period fraught with uncertainty for the board, investors, employees, and the incoming leader. How can a company harness the immense institutional knowledge and relationships of the departing CEO without creating a shadow leadership structure that undermines their successor?
One increasingly popular solution is the appointment of an Executive Chair (EC). This hybrid role, sitting at the intersection of management and the board, is designed to smooth the transition. But does it truly work?
New research from Spencer Stuart delves into this complex question, analyzing the performance of hundreds of companies that have adopted this model. The findings are decisive: the Executive Chair is a double-edged sword. When implemented correctly, it can be a catalyst for stability and growth. When handled poorly, it can lead to confusion, conflict, and significant underperformance.
In this comprehensive guide, we will unpack Spencer Stuart’s data, explore the global nuances of the role, and provide a detailed roadmap for boards considering this delicate transition strategy.
Understanding the Executive Chair Role: A Hybrid Governance Model
Before diving into the data, it’s crucial to understand what an Executive Chair is and isn’t.
- What it is: An Executive Chair is a non-independent member of the board of directors who also holds a formal, active executive position within the company’s management. They are typically involved in strategic guidance, major project oversight, and high-level stakeholder relations. This differs from a standard Non-Executive Chair, who leads the board but is not part of day-to-day management.
- What it isn’t: It is not a co-CEO role. The fundamental principle, as Spencer Stuart’s research emphasizes, is that “there can only be one CEO.” The Executive Chair role is intended to support and advise, not to share or usurp the ultimate decision-making authority of the new Chief Executive Officer.
The prevalence of this role is growing rapidly. In the U.S. alone, 203 public companies with a market cap of at least $500 million now have an executive chair—a staggering 56% increase since 2020. Of these ECs, a majority (57%) were the previous CEO, and over a quarter (29%) were the company’s founder or co-founder.
The Performance Paradox: Data Reveals a Stark Divide
Spencer Stuart’s central research question was: “Does having the outgoing CEO transition to executive chair enhance business performance?”
To answer this, they examined the performance of these U.S. companies over the course of the executive chair’s tenure, comparing them to their industry peers. The results were strikingly bipolar:
- The Hindrance (54% of companies): More than half of the companies with an EC underperformed their peers by an average of 14%.
- The Help (46% of companies): The remaining subset overperformed their peers by an equally significant average of 14%.
This almost even split confirms that the role itself is not a guaranteed success formula. The devil is in the details—the how and why of the transition matter immensely. Similar research on top listed companies in Italy, Spain, and Switzerland showed equally mixed performance, reinforcing that the model’s effectiveness is entirely dependent on its execution.
A Global Perspective: The Executive Chair Across Borders
The acceptability and prevalence of the Executive Chair model vary dramatically across global markets, heavily influenced by local governance codes and cultural norms.
| Country | Executive Chair | Chair/CEO | Non-Executive Chair | Key Insight |
|---|---|---|---|---|
| United Kingdom | 3% | 0% | 97% | UK governance codes strongly recommend separation of chair and CEO roles, favoring a strong, independent chair. |
| Switzerland | 11% | 2% | 87% | Similar to the UK, a strong preference for independent oversight leads to few ECs. |
| United States | 15% | 36% | 49% | The highest rate of combined Chair/CEO roles, with the EC serving as a common transition tool. |
| Spain | 26% | 25% | 49% | A more common model, often found in founder-led businesses. |
| Italy | 27% | 18% | 45% | Similar to Spain, with a higher tolerance for executive influence on the board. |
| France | 0% | 31% | 79% | The two-tier board system in Germany makes the EC role a legal impossibility. |
Source: Spencer Stuart Board Indexes
This table reveals that the EC is not a one-size-fits-all solution. It is most likely to be found in specific situations:
- Founder-Led & Family-Controlled Businesses: Where the founder’s continued presence is valued for stability and vision.
- Internal Succession Planning: To smooth the handover from a legendary CEO to a less-experienced internal candidate.
- Crisis or Major Events: Such as navigating a complex merger, acquisition, or turnaround situation requiring enhanced oversight.
- Complex Sectors: Providing continuity after appointing an external CEO in industries like technology or biopharma where deep technical knowledge is key.
The Four Ground Rules for a Successful Executive Chair Transition
Spencer Stuart’s research, supplemented by interviews with executives who have lived through this process, crystallizes into four non-negotiable rules for making the Executive Chair model work.
Rule 1: Ensure the Handover is Clear, Visible, and Quick
The single most important factor for success is the unwavering support and correct intention of the outgoing CEO.
- Unambiguous Support: The former CEO must be fully committed to stepping back from operational control. If they harbor any desire to retain power or defend their legacy, this model is destined to fail. Alternative succession plans must be considered.
- One CEO, One Leader: The message to the entire organization—and the outside market—must be crystal clear: the new CEO is in charge. The board and outgoing CEO must publicly and privately endorse the new leader, accepting that they will do things differently, perhaps even dismantling previous strategies.
- Define the Tenure: The Executive Chair role should not be a permanent retirement home. Establish a clear timeline—e.g., 12 to 24 months—for the transition period, after which the EC will typically step down entirely or transition to a non-executive chair role.
Rule 2: Prioritize Building Trust Above All Else
The relationship between the new CEO and the Executive Chair must be built on a foundation of mutual respect and transparent communication.
- Mentorship, Not Rivalry: The EC must embrace the role of a coach whose sole mission is to see the new CEO succeed. This requires humility and a genuine desire to serve the company’s future, not its past.
- Radical Transparency: The CEO must never be surprised by the EC’s actions or conversations. All activities should be transparently communicated. Regular, candid one-on-one meetings are essential to navigate delicate situations and build trust.
- No Gatekeeping: The Executive Chair must not become a filter or gatekeeper between the new CEO and the rest of the board. The CEO should be encouraged to build direct, strong relationships with all directors, especially the Lead Independent Director.
Rule 3: Meticulously Define the Division of Labor
Vagueness is the enemy of success. The responsibilities of the Executive Chair must be explicitly documented and agreed upon by the board, the EC, and the CEO.
Common Executive Chair Responsibilities include:
- Advising and mentoring the new CEO during the onboarding period.
- Focusing on long-term corporate strategy and vision.
- Managing key strategic customer, investor, and partner relationships.
- Leading specific, board-delegated projects (e.g., a major joint venture, a new product launch, or a geographic expansion).
- Acting as the primary liaison between the board and management.
- Presiding over shareholder meetings and supporting investor communication.
- (In some cases) signing off on financial statements.
Responsibilities that MUST remain with the CEO:
- Final decision-making authority on all operational matters.
- Setting the company’s operational priorities and budget.
- Hiring and firing of the executive team.
- Presenting strategy and performance to the board.
- Being the primary public face of the company.
Rule 4: Structure the Board to Support the New CEO, Not the Executive Chair
The governance structure must be designed to empower the new leader.
- Mandate a Strong Lead Independent Director (LID): Most boards with an EC already have an LID. This role becomes critically important. The LID provides a independent check and balance, ensures the board’s independence is maintained, and serves as a crucial confidant for the new CEO.
- CEO Involvement in Board Composition: The new CEO should have a voice in board refreshment and composition to ensure the directors have the skills and experience needed to support the company’s future direction.
- Formal Evaluation: The board’s governance committee should formally evaluate the dynamics of the CEO-EC relationship on a regular basis, creating a safe forum to discuss what is and isn’t working.
Intentionality Determines Outcome
The Spencer Stuart research delivers a powerful conclusion: the Executive Chair is not inherently a good or bad governance tool. Its impact on company performance is entirely determined by the intentionality, clarity, and humility with which it is implemented.
For boards considering this path, the questions are not merely about role definitions but about human dynamics:
- Is our outgoing CEO truly ready to let go?
- Do we have a plan to build trust between two powerful leaders?
- Have we been explicit enough in dividing responsibilities?
- Is our board structure set up to support the new CEO’s autonomy?
For more insights on effective governance and leadership succession, explore our related content on The Role of the Lead Independent Director and Best Practices for CEO Onboarding.
When done right, the Executive Chair role can provide invaluable stability, wisdom, and strategic continuity during a vulnerable time. When done wrong, it creates a layer of confusion that can cripple a new leader and stagnate a company. The difference lies in the commitment to these four ground rules.
FAQs: The Executive Chair Role
An Executive Chair is a hybrid leadership role. They are a member of the company’s board of directors (typically a non-independent member) and also hold a formal, active executive position within management. They are more hands-on than a standard Non-Executive Chair but are not the CEO. Their role is often focused on high-level strategy, mentoring, and managing key stakeholder relationships during a transition period.
Non-Executive Chair: Leads the board but is not part of company management. Their role is one of oversight, governance, and advising management from an independent perspective.
Chair/CEO: A single individual who holds both the chief executive officer and board chair titles, consolidating decision-making power.
Executive Chair: A blend of the two. They are part of management but do not hold the CEO title. They work alongside the CEO, providing support and guidance without having final operational authority.
According to Spencer Stuart’s data, there has been a 56% increase in U.S. public companies with an EC since 2020. This rise is often driven by boards wanting to retain the expertise and relationships of a departing founder or long-serving CEO to ensure a smooth transition, maintain stability, and provide mentorship to the new CEO.
The data shows mixed results. Spencer Stuart’s research found that 54% of companies with an EC underperformed their peers by an average of 14%, while 46% overperformed by an average of 14%. This indicates that the role itself is not a guarantee of success; its effectiveness depends entirely on how the transition is managed and the clarity of the roles.
The biggest risks include:
Role Confusion: Creating ambiguity for employees, investors, and stakeholders about who is ultimately in charge.
Undermining the New CEO: If the former CEO struggles to let go, they can unintentionally (or intentionally) undermine the new CEO’s authority and decisions.
Stifling Innovation: The new CEO may feel pressured to maintain the status quo rather than implement necessary changes.
Board Dynamics: The EC can act as a gatekeeper between the new CEO and the rest of the board, preventing the CEO from building crucial independent relationships.
Common responsibilities, as outlined in the article, include:
Advising and mentoring the new CEO during the transition.
Focusing on long-term corporate strategy and vision.
Managing key strategic customer and partner relationships.
Leading specific board-delegated projects (e.g., M&A, partnerships).
Acting as a liaison between the board and management.
Presiding over shareholder meetings.
Signing off on financial statements (in some cases).
This is the most critical factor. The outgoing CEO’s only interest must be the success of their successor. They must approach the role with humility and a desire to support, not to defend their legacy or retain control. Any hesitation about fully transitioning out of power is a major red flag.
