When the Former CEO Becomes Chair: Continuity or a Governance Risk?

When an outgoing CEO is appointed as Board Chair, the decision often feels logical. After all, they understand the business, they know the people, and they carry institutional memory. On paper, it appears to be continuity at its best.

In practice, however, this transition can quietly undermine one of the board’s most critical responsibilities of independent oversight.

Across organizations of varying sizes, this governance arrangement has yielded mixed outcomes. While some boards manage the transition well, others experience blurred roles, weakened challenge, and strained leadership dynamics - often without realizing it until performance begins to suffer.

Why Boards Are Tempted to Make This Move

Boards usually appoint a former CEO as Chair with good intentions. Common reasons include:

·         Preserving organizational memory during leadership transition

·         Providing stability in periods of uncertainty

·         Retaining experience and industry insight

·         Rewarding long-serving leadership

These motivations are understandable, especially in founder-led businesses, family enterprises, and organizations with limited succession depth. But continuity should never come at the expense of accountability.

Where the Governance Risk Emerges

The risk is rarely about competence but about influence.

Even after stepping down from executive duties, former CEOs often retain informal authority. This can manifest subtly:

·         Management continues to seek direction from the former CEO

·         The new CEO hesitates to assert authority

·         Board discussions become cautious or deferential

·         The strategic challenge is softened or avoided

Over time, the board may drift into a rubber-stamping role, where decisions are influenced before they reach the table. The separation between governance and management becomes blurred, not through intent, but through habit.

The Impact on the New CEO

One of the most overlooked consequences of this arrangement is its effect on the incoming CEO.

A Chair who previously held the executive role may, even unconsciously:

·         Compare decisions to how they “used to do it”

·         Step into operational detail

·         Signal preferences that limit executive autonomy

This creates an uneven leadership dynamic. The new CEO may feel overshadowed, constrained, or reluctant to innovate, especially if the former CEO remains influential with other directors.

When this happens, leadership accountability becomes diluted, and performance expectations lose clarity.

Why Governance Codes Warn Against It

Global governance frameworks consistently caution against appointing former CEOs as Chairs without safeguards.

The concern is not on personal capability, but on structural independence. Effective Chairs must be able to:

·         Hold management to account

·         Facilitate an open challenge

·         Remain neutral and objective

·         Lead the board, not the organization

When the Chair has recently been part of management, these responsibilities become harder to fulfil and harder for others to question.

What Best Practice Recommends

Boards that wish to manage this risk responsibly typically consider:

1.      A cooling-off period
Allowing time, often several years, between executive exit and board leadership helps reset relationships and expectations.

2.      Clear role boundaries
Explicit articulation of what the Chair will and will not do reduces informal interference.

3.      Strong independent voices
A Lead Independent Director or a well-balanced board can help counter the concentration of influence.

4.      Regular board evaluations
Board evaluations help surface power dynamics, behavioral patterns, and decision quality that may otherwise go unaddressed.

These measures do not eliminate the risk, but they significantly reduce it.

The Often-Invisible Role of the Company Secretary

Company Secretaries are often among the first to notice when governance balance begins to shift. Through agenda design, meeting flow, and board interaction, they observe:

·         Who influences decisions before meetings

·         Where discussion is constrained

·         How authority is exercised in subtle ways

A well-positioned Company Secretary supports the Chair and the board by:

·         Advising on role clarity

·         Structuring agendas to encourage genuine discussion

·         Flagging emerging governance concerns early

·         Supporting independent evaluation processes

This is not about confrontation, but stewardship, ensuring governance structures support long-term effectiveness rather than short-term comfort.

Continuity Requires Discipline, Not Convenience

Chairing a board is not a recognition award or a ceremonial role. It is an accountability position that demands restraint, neutrality, and the ability to step back.

Boards that approach this transition thoughtfully rather than conveniently are better positioned to protect independence, empower leadership, and sustain performance.

Continuity can be valuable. But without safeguards, it can quietly become a governance liability.

Contact Us

Leadership transitions can strengthen governance or quietly undermine it if not handled with care. Azali works with boards, Chairs, and Company Secretaries to assess governance risks, clarify roles, and support effective board leadership during periods of change. If your organization is navigating a transition at the board or executive level, we are available to support with thoughtful and practical governance solutions.

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