Shareholders are pushing for companies to put different individuals into the roles of chairman and CEO. Here are some of the implications of such a move.
In the wake of corporate scandals, government bailouts, and heightened shareholder activism, the move to separate the roles of board chair and chief executive officer at U.S. public companies is gaining rapid ground. Advocates of role-splitting maintain that the arrangement is better business, enabling the CEO to run the company with minimum distraction while the chair leads the board, recruits new members, advises the CEO, and manages CEO succession. The move is heralded also as a way to promote more open communication, better manage risk, and ensure truly independent leadership.
There is, of course, a competing view that favors a single person serving as chair and CEO, but with a separate lead independent director. Respected business leaders, corporate attorney Marty Lipton, for example, express a more traditional view that the chair/CEO model is better for driving long-term shareholder value in many companies. Supported by historical data that purportedly shows little correlation between splitting the roles and shareholder value, proponents of the merged role have a point when they suggest that the chemistry needs to be right to split the roles—or else risk adversity between board and management.
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