Elon Musk was the subject of a recent SEC settlement that, in addition to costing himself and Tesla $20,000,000 each in fines, will require him to step down as Chairman of the Board for at least 3 years. Meanwhile, he will stay on as the company’s chief executive officer (CEO), and Tesla will be required to hire an independent chairman to oversee the company’s board during that time. This raises an interesting question that we often receive: What exactly is the role of a board chairman (or chairwoman), and how does this differ from the role of a CEO or President of a company?
Most people think that a board’s chairperson is primarily tasked with running meetings of a company’s board of directors. This is certainly one aspect of the role, and an important one – board meetings are short and periodic in relation to the constant day-to-day functions of a company. The board chair establishes the ultimate agenda for each meeting and keeps the other directors on task and on topic at these often-critical meetings. But the duties do not stop there. As the leader of a board, the Chairperson serves as a key liaison between the operational leadership of the company (the C-Suite officers) and the rest of the board. In between meetings, they will continue to progress the initiatives of the board, manage strategic directives, and manage the work of board committees.
The role of Chief Executive Officer is filled by appointment of company’s board of directors. This is the highest ranking employee within an organization. The CEO develops and implements the vision of the company – both the short and long-term goals. She sits on the board of directors (sometimes as the chair) and manages the work of the other executive-level employees. The CEO also plays a key part in designing and modeling the culture of an organization. The CEO will lead the charge for fund raising when a company is looking to bring on investors and scale its operations.
The President and CEO can be the same person – they often are. However, it is not uncommon to have a President that is subordinate to the CEO. The President is the chief operational manager of the company, and she manages the daily operation of the company. The President is in charge of all of a company’s managers and ultimately oversees all of the company’s day-to-day operations across all divisions, from HR, to accounting, to development and to sales.
A New Chairman’s Impact on Tesla
Mr. Musk’s resignation from the position of Board Chairman of Tesla is very significant. The installation of an independent chairman means a big step toward more robust outside oversight of Mr. Musk and the company over which he exercised very close control. He maintains a large amount of discretion and authority as CEO, but while that power was once largely unchecked, he will now answer to a board run by an independent party. As is the case with all corporations, Tesla’s board of director serves to forward and protect the interests of the corporation’s stockholders. This move will no doubt serve to provide some level of increased comfort to stockholders who may have been wondering about the future of Tesla.