CEO Chairman Split

A long time shareholder proposal at many large U.S. companies has been to separate the roles of CEO and Chairman. CEOs resist this “attack” on their power by the owners of the company.

Joann Lublin reports in a 3/30/09 WSJ article that corporate leaders are now recognizing that splitting these two roles would help companies perform better. The article cites a Corporate Library report that “37% of companies in the Standard and Poor’s 500-stock index have separate chairmen and CEOs, up from 22% in 2002”.

Many European companies have these roles split. U.S. corporate bylaws are structured so that it is difficult for a stockholder proposal challenging the CEO to win a majority of votes. Many mutual fund shares are not voted, defaulting the vote to the company’s management.

Many CEOs want tight control of the corporation, believing in the strength of their vision and execution. When the company’s performance doesn’t measure up, these CEOs look more like a wily fox with a key to the hen house. The shareholders get a key to the poor house.

Posted in: CEO

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