To split or not to split: Roger, Henry, Bunkie, and Lee ... in boardroom blackjack.

• Author: Kaback, Hoffer
• Position: QUIDDITIES - Roger M. Blough, Henry Ford II, Semon E. Knudsen, Lee Iacocca

IN BLACKJACK, only a blockhead--or an expert--ever splits 10s. A wrinkle: To camouflage his skill, sometimes a top-notch player intentionally won't split 10s when he knows he should, or will split them when he knows he shouldn't.

This complication should generally be absent from the boardroom. If, therefore, a director truly believes that it is right, proper, and appropriate for his company to split the positions of chairman and CEO, then he should advocate effectuating that; and inversely.

The above paragraph does not say that since--or even if--it is "good governance" to split, then that should be done. One reason is that there is considerable, respectable debate about whether such a split is a good idea from either a governance or a business viewpoint.

Examples of worthwhile analyses include those of Norman Augustine in the Winter 2004 DIRECTORS & BOARDS ("under most circumstances" a split is bad), Paul Volcker in an interview with me in the Fall 2000 D & B (a split is good, especially for a company in trouble that needs an alternative source of leadership); Ram Charan in the book Boards at Work (a split is "detrimental to the board dynamics"); and B-school professors Brickley, Coles, and Jarrell in a 1996 study, "Leadership Structure" (evidence suggests "costs of separation larger than the benefits" for most big companies).

In reflecting on the important split decision, directors might also want to make sure that they have an appreciation of relevant American business history. One repeatedly sees the assertion that, for years, the British have gotten it right by having a separate nonexecutive chairman and that, correspondingly, we have gotten it wrong by having embraced the idea of the imperial CEO.

But American business practice was not always the way it was in the roaring '90s. As ex-Yankees' manager Casey Stengel used to say, "You could look it up":

Item: In President Kennedy's 1962 showdown with the steel manufacturers over a $6/ton price increase, his principal antagonist was Roger M. Blough of U.S. Steel. In news reports, Blough was not customarily described merely as Steel's "chairman of the board." Instead, he seemed mainly to have been called the "chairman" of Steel.

That usage conveyed that Blough verily was the Supremo--not just an ersatz pooh-bah whose main charge was to create the agenda for the next board session and to serve as a conduit between the board and the guy (or guys) actually running the company. No one at Steel...