Let's get real on role separation: is splitting the CEO and chairperson positions leading edge ... or over the edge?

• Author: Dalton, Dan R.
• Position: BOARD PRACTICES

AMONG THE enduring debates in corporate governance is the board of director's choice for its leadership structure. At issue is the efficacy of essentially two available choices. In the far more common structure, the CEO of the company serves simultaneously as chairperson of the board. Alternatively, those roles can be separately held by two individuals. Advocates of the latter option are adamant that directors are unable, or unwilling, to dispassionately evaluate the firm's CEO when he or she also serves as chairperson of the board. Indeed, that approach has been referred to as the functional equivalent of CEOs grading their own homework.

We will--conditionally--concede that point. We also recognize that boards must be increasingly vigilant to this aspect of leadership structure as the recent fervor for corporate icons such as Bank of America, Office Depot, Texas Instruments, and Weyerhaeuser to adopt an independent board chairperson attests.

That said, there are a number of related factors that boards should carefully balance prior to considering their choice of the appropriate board leadership structure. Indeed, the election to separate the positions of CEO and chairperson of the board may be a textbook case of alleviating one pressure point while escalating a host of others, rather like Hans Brinker using his finger to plug the hole in the dike.

A separate chairperson does not constitute independence

The anchor of the separate leadership argument is that this choice facilitates a move independent board leadership structure. In what we would charitably describe as one of the great ironies of contemporary corporate governance, nothing could be further from the truth. In fact, separate leadership rarely results in that outcome.

The basis of this assertion is that a leadership structure with a separate CEO and board chairperson is not necessarily indicative of independence. As noted by SpencerStuart's 2008 Board Index, in the cases where there is a separate CEO and chairperson of the board, only 16% of these chairpersons are actually "independent." Why? Because these separate board chairs are virtually always the former CEO of the company. Many keen observers of contemporary corporate governance, both inside and outside of the boardroom, have noted the nascent folly of prior CEOs serving on the board in any capacity, let alone as its chairperson.

On the majesty of a single voice--unity of command

Notably, separate board leadership fundamentally violates the basic concept of unity of command, a notion embraced from the very onset of the formal study of administrative and organizational theory. Unity of command directs that any person in an organization should be accountable to one, and only one, individual. In a decidedly different context, with venerable provenance, we are...