Splitting the Ceo& Chairman

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Corporate Governance: Separating the CEO and the Chairman Roles Reference: Millstein Center
Publication Name: D & O Diary
Publication Date: Tuesday, April 14, 2009
Article by : Kevin LaCroix
Article summary:
Many voices are calling public companies to separate the Chairman and CEO functions and to make this model a default governance structure and many evidences shows advantages of that. Pushing to separate the two roles is not a new idea, but it has gained support from many sources lately. The Chairmen’s Forum suggests that the public companies should voluntary adapt the approach of separating the roles or at least explain to the shareholders why is it best for them not to. One of the commentators thinks that separating the roles had been adapted successfully in many companies in many regions in the globe and he thinks it is a mean to insure independence among the board. While the former chairman of Northwest Airlines as thinks combining the rules is putting both positions in one hand conflict with the oversight and monitoring for the CEO and the management team. Notes from the SEC chair Mary Schapiro speech to the council of institutional investors in April 6, 2009 indicates that she is suggesting a possibility of an SEC move towards separating the two rules. The reason for targeting this issue is because a study just released by the corporate library described that companies whose CEO also serve as board chair are “more likely to have certain troubling corporate governance characteristics than companies where the roles are separated." The problems associated with combining the two positions include: long CEO tenures, fewer board meetings per year, classified board structure, and presence of executive committees. The Corporate Library’s findings raise the possibility that having a single person as the Chair and CEO could be a risk factor for D&O insurance underwriters to assess. Splitting the roles of the CEO& Chairman alone is not enough to insure...
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