The Chair-CEO Chemistry Problem in SMF Appointments
Much is written about what the SMF9 chair and SMF1 chief executive each need individually: the fit and proper test, the Statement of Responsibilities, independence. Far less is written about the relationship between them, which in practice is often what decides whether either appointment succeeds. A strong chair and a strong CEO can still produce a dysfunctional board if nobody tested how they would work together. This post explains why the relationship matters to regulators, how searches go wrong and how to assess it properly.
Why the Relationship Carries So Much Weight
The SMF9 chair and SMF1 chief executive sit at the top of the firm’s governance, and the SMCR depends on each of them doing their own job properly. The chair leads the board and makes sure it challenges the executive. The CEO runs the business and gives the board the information it needs. A chair who defers to the CEO isn’t providing the independence regulators expect. A CEO who treats the chair as a formality isn’t giving the board real engagement. Where the relationship works, challenge and escalation happen and problems surface early. Where it doesn’t, individual competence in either role can’t fully compensate.
Regulators know this. The PRA in particular looks closely at board effectiveness and at the chair’s ability to challenge, and supervisors often ask about the relationship when they meet the chair, the CEO or the Senior Independent Director.
What Goes Wrong
Searches that focus only on capability, meaning track record, technical knowledge and regulatory experience, and skip the relationship regularly produce appointments that look right on paper and don’t work in practice. Our sister practice Exec Capital sees the same pattern in CEO searches outside financial services. The risk runs both ways: a board appointing a new chair without testing how they will work with the existing CEO takes the same gamble from the other seat.
The failure is rarely dramatic. It is slow erosion. Two capable people never quite build the trust that lets real challenge happen, so meetings stay comfortable and problems are raised later than they should be. By the time it is visible to the board or the regulator, the pattern has often been running for a year or more.
| Pattern | What it looks like | Regulatory risk |
|---|---|---|
| Dominant CEO, deferential chair | Board papers arrive late; challenge is polite; decisions are made before meetings | Board not exercising effective oversight; chair independence questioned |
| Executive chair, frustrated CEO | Chair involved in day-to-day management; CEO’s authority unclear | Blurred accountability; Statements of Responsibilities don’t match reality |
| Distant relationship | Little contact between meetings; surprises at the board | Issues escalated late; poor information flow |
| Too close | Chair and CEO aligned on everything; other directors excluded | Groupthink; non-executives unable to challenge |
What a Good Relationship Looks Like
- Clear, written division of responsibilities between chair and CEO, reflected in both Statements of Responsibilities
- Regular contact between board meetings, with no surprises in either direction
- A CEO who brings bad news to the chair early
- A chair who challenges in private and supports in public
- Both comfortable disagreeing, and both able to show how a disagreement was resolved
- Both open to other directors’ views, and to the SID’s role in evaluating the chair
How to Assess It
This isn’t a “do they get on” conversation at the final interview. A proper assessment covers:
- Track record: how the candidate has worked in a comparable pairing before, including through a real disagreement. Ask for specific examples, then test them with referees who were there.
- Working style: how each prefers information, how much notice they want before a difficult board discussion, and whether the CEO’s instinct under pressure is to involve the chair early or manage alone.
- Expectations of the role: how much involvement the chair expects in strategy, investor relations and regulator contact, and whether the CEO agrees.
- Structured meetings: a facilitated conversation between the incoming candidate and the existing post-holder before an offer, covering how they would handle a specific scenario.
- Deep referencing: conversations with former chairs, CEOs and non-executives, going beyond standard competency checks to ask how the relationship worked when things were difficult.
Where both roles are being filled at once, run the assessment in both directions rather than filling one seat and hoping the second adapts. Where only one seat is open, give the candidate an honest picture of how the existing post-holder works, not the polished version from a first exploratory call. See interviewing SMF candidates.
Questions to Ask Referees
- Tell me about a time the candidate and the chair (or CEO) disagreed. How was it resolved, and what did the board see?
- How did they handle bad news: who heard first, and how quickly?
- How did they treat the other non-executives and executives? Did others feel able to speak?
- Where did they draw the line between the chair’s role and the CEO’s?
- How did the relationship change when the firm was under pressure, for example during a supervisory review or a poor year?
- Would you want them in that role again, alongside the same counterpart?
Referees who worked with both people give the most useful answers. Former company secretaries and SIDs are often the most candid, because they saw the relationship from the side. Our pre-offer checks guide covers referencing more generally.
Why It Needs a Retained Search
Assessing the relationship properly takes time and depth: structured referencing, facilitated meetings and honest feedback in both directions. A contingency search built around speed and volume doesn’t allow for it. That is one reason chair and CEO appointments at regulated firms usually run through a retained search.
Timing Makes It Harder to Skip, Not Easier
With approval, an SMF9 or SMF1 appointment typically takes six to nine months from the start of the search to the first day; see how long SMF appointments take. Boards feel pressure to speed up the search, and the chemistry assessment is the first thing cut. It should be the other way round. Given how long the appointment will last and how much the relationship will shape it, a few extra weeks spent testing it are a small part of the timetable and one of the most valuable.
Scenario: A specialist bank is replacing its chair. Its CEO is strong, founder-like and used to a chair who rarely challenged him. The board’s preferred candidate is a well-known former bank CEO with a forceful style. We arrange a structured meeting between the two around a real issue, the bank’s growth plans versus its capital position. It becomes clear they would clash on the chair’s role in strategy. The board appoints a different candidate, a former PRA-regulated chair with a record of challenging strong CEOs constructively. Her approval interview focuses on how she will hold the CEO to account, and she can answer with specifics.
After the Appointment
Chemistry is not fixed at appointment. The chair and CEO should agree how they will work together in the first months, and the SID should include the relationship in the chair’s annual evaluation. Where it starts to drift, the SID and the nomination committee are the people to notice. Our guide to governance reviews covers how boards can check.
Chair and CEO Recruitment
Leadership for regulated boards. Every board search is overseen by Adrian Lawrence FCA
Chief Executive
SMF1 searches.
→ Regulated CEO (SMF1) → Retained executive searchSMF1 explained →
Chair
SMF9 and committee chairs.
→ Chair and committee chairs → Multi-SMF team buildSMF9 explained →
Board Effectiveness
Checking how the board works.
→ Governance review → Urgent SMF replacementSMF14 explained →
Board Tools
For nomination committees.
→ Board skills matrix template → Succession planning templateCollective suitability →
Every board search is overseen by Adrian Lawrence FCA
Frequently Asked Questions
Why do regulators care about the chair-CEO relationship?
Because effective governance depends on the chair challenging the CEO and the CEO giving the board real engagement. A poor relationship weakens oversight.
How can a board assess chemistry before appointing?
Through track record, deep referencing, structured meetings between the candidate and the existing post-holder, and clear agreement on the division of roles.
Should we fill the chair and CEO roles at the same time?
It is better to stagger them where possible. Where both are open, assess the relationship in both directions.
Who monitors the relationship after appointment?
The Senior Independent Director, through the chair’s evaluation, and the nomination committee.
Does chemistry mean appointing someone who agrees with the CEO?
No. Good chemistry means they can disagree productively, not that they always agree.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He oversees every SMF Capital search. View Adrian’s ICAEW profile.
Appointing a Chair or CEO?
Tell us about your board and the relationship you need. We’ll come back with a search plan the same working day.
Adrian Lawrence FCA is the founder of SMF Capital and a Fellow of the Institute of Chartered Accountants in England and Wales and holds an ICAEW practising certificate in his own name. He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience working with boards, investors and business owners across the UK. He founded SMF Capital to help FCA and PRA-regulated firms appoint the Senior Managers the regulators expect, with the fit and proper assessment built into every search, and personally leads every Senior Manager Function search.