The Chairman/CEO separation: view one.

• Author: Parker, Hugh
• Position: Separation of roles; corporate governance in UK

What can American boards learn from the British? The need to bring back into balance a relationship that has become seriously unbalanced.

It has long been taken for granted by Americans that our country leads the world in the techniques and practice of management -- we were, after all, pioneers in formal management and business education, and in professional management consultancy -- and therefore that we have little to learn about management from other countries. This assumption may have been generally valid until, say, the early 1970s. But in more recent years, other countries have clearly overtaken us, and in some ways even surpassed us.

One particular area of corporate management in which another country, the United Kingdom, has, I think, made greater progress than we have in the U.S. is in what now is commonly called "corporate governance." While this has been and continues to be the subject of much debate in the U.S., much of this seems to center on essentially constitutional or legalistic issues: the rights of shareholders, the relationship between the board and management, the locus of decisionmaking on certain key issues (e.g., executive compensation, appointment of directors, strategic options), the accountability of directors to other stakeholders, and so on.

One important sub-issue within this larger debate concerns the separation of the roles of chairman and chief executive, which even now is far from being resolved. It is on this point that I believe we may be able to learn something from the U.K. experience.

The starting point for that experience was for me a conference held in London in 1972, co-sponsored by the British Institute for Management and McKinsey & Co., on the subject of "Effective Boardroom Management." That conference, for which I acted as chairman, was attended by 20 chairmen and senior executives of major U.K. public companies. This event focused attention for the first time on what had previously been a virtually taboo subject: the performance (or not) of public company boards, chairmen, and directors. From this there then followed a slowly but steadily increasing flow of studies, surveys, articles, and seminars on the duty and responsibilities of public company boards of directors. These culminated in the publication last year of the Cadbury Commission on The Financial Aspects of Corporate Governance.

The Cadbury Report commended a "Code of Best Boardroom Practice" that embodies a number of significant...