INVESTING EXPLAINED: What you need to know about chairman – is this term more appropriate than chairman?

In this series, we debunk the jargon and explain a popular investment term or theme. Here it is a chair.

Nothing to do with furniture…

No, you’re right. But there has been a new development in the debate over what name to use for the executive branch that occupies the highest seat at the boardroom table.

Is ‘chairman’ the right term? Or is ‘chairman’ more appropriate, since the person taking on this role may now be a woman?

So, what’s new?

A Bloomberg survey provided the impetus. This research shows that 185 of the companies in the US S&P 500 index use ‘chair’ or ‘chairperson’ – three times as many as in 2020.

Among those who have made the switch are three major banks: Bank of America, JP Morgan and Wells Fargo. But Goldman Sachs, Morgan Stanley and Citi still use a chairman – although Citi has a female CEO in Jane Fraser.

Nearly half of tech groups use the term “chair,” including Alphabet, Amazon, Meta and Tesla.

So ‘chairman’ may become redundant?

Not so fast. As the Bloomberg survey shows, in recent months there has been a decline in the number of companies deciding to order a change in the ‘chairman’.

However, the reasons for this are much broader than just the desirability of gender-neutral language.

There is a growing backlash against corporate woke behavior, with more and more politicians and business people questioning the effectiveness of DEI (diversity equity inclusion) strategies, which have been promoted as a way to boost employment and to increase other opportunities for minorities.

Who are the most important spokespersons in this debate?

Elon Musk, the Tesla boss, is the business world’s most vocal opponent, claiming that “DEI is just another word for racism.” He argues that DEI’s policy “discriminates on the basis of race, gender and many other factors” and is therefore “immoral and illegal.” What its chairman Robyn Denholm thinks of this position has not been recorded.

Any other key figures?

Billionaire hedge fund boss Bill Ackman, founder and CEO of the FTSE 100 member Pershing Square Investment Trust, led a high-profile campaign last year to dethrone Harvard’s president over anti-Semitism on the university’s campus.

Pershing Square has a female chairman in Anne Farlow. But it’s likely that most investors will be less concerned about the title choice for this board position than they are about the trust discount. The share price is 28 percent lower than the value of his net assets.

Is chairman still the most common term in Britain?

Since it has been around since the 17th century, it seems likely that it will continue to exist for a while. For example, the term chairman will still be used at John Lewis – this week Jason Tarry replaced Dame Sharon White. However, when a woman is appointed to the role, there appears to be a preference for ‘chairman’. Cressida Hogg, from BAE, and Caroline Silver, from Barratt, are ‘chairs’. In 2022, then-chancellor Kwasi Kwarteng rejected a call from various agencies for the government to replace ‘chairman’ with ‘chairman’.