It has been announced that Barack Obama is to meet the chairman of BP. Given the different roles that the chairman and chief executive of an organisation have, it is interesting that the US President wants to meet the former rather than the latter.
The role of the chief executive is to run a firm on behalf of its shareholders. This means that all day-to-day decisions are the chief executive’s responsibility. The role of the chairman, on the other hand, is to run the board. It is the chairman’s responsibility to ensure that the firm is being run in the best interests of the shareholders.
To ensure that there is no conflict of interest, the roles of chairman and chief executive are normally held by different people. The chairman is therefore usually a non-executive director – that is, he or she takes no part in running a firm. Whilst the board as a whole is responsible for determining the strategy of an organisation, only its executive members are responsible for implementing that strategy.
So why does President Obama want to meet the chairman? It could be because he has concerns about the strategic direction of BP, but the oil spill in the Gulf of Mexico appears to be an operational issue. It seems more likely that the President is concerned about the level of oversight that the non-executive directors have exercised over the executives, in particular the chief executive officer.
The chairman of a board is also responsible for assessing the performance of the other directors. In theory, this could even mean recommending that a director’s appointment be terminated. Given that Barack Obama has already expressed the view that Tony Hayward – the BP chief executive – would have been fired had he worked for the President, perhaps the underlying reason for the meeting is to provide input to this appraisal process. The scope of the meeting is certainly likely to be broader than the immediate impact of the oil spill.
