Time to Retire the CEO‐Board Chair Role?

• Date: 01 January 2021
• Published date: 01 January 2021
• DOI: http://doi.org/10.1002/bl.30179
• Author: Joseph C. Santora

4 BOARD LEADERSHIP

News

(continued from front page) Time to Retire the CEO-

Board Chair Role?

by Dr. Joseph C. Santora

Dr. Joseph C. Santora is the founder of TST, Inc., a management

consulting company, editor of the International Leadership Journal

(internationalleadershipjournal.com), and an executive educator. In this article, he

examines the argument for eliminating the dual role of board chair/CEO.

The CEO-board chair role has pro-

voked highly contentious debate

among many corporate board observ-

ers. Board activists, board members,

and other corporate stakeholders, as

well as academics and practitioners are

among the cast of corporate actors

who have vigorously and actively par-

ticipated in this exchange over the

years. At the center of this issue is the

following question: Should a corporate

CEO also hold the board chair posi-

tion? Or rather, should the CEO-board

chair position be split into two sepa-

rate positions held by two different

people: a CEO and a board chair?

The origins of these two corporate

governance positions stem from the

early 20th century. Their established

historical and philosophical man-

agement roots have unquestionably

created some very compelling perspec-

tives on both sides of the debate. For

example, advocates of appointing a

single person for the CEO and board

chair position contend that this struc-

ture allows for tighter control through

what French engineer and manage-

ment author Henri Fayol calls “unity of

command,” one of the 14 principles of

management in his general theory of

management. Moreover, this arrange-

ment can avoid a possible battle

royale on important corporate issues.

An example of a combined corporate

leadership governance structure can

be seen in banking giant JPMorgan,

headquartered in New York City, where

Jamie Dimon has held the consolidated

position of CEO-board chair at the

bank for more than 13 years. Adopt-

ing a similar corporate governance

structure, oil giant ExxonMobil, head-

quartered in Irving, Texas, is headed

by Darren Woods, who has held the

CEO-board position since 2017. It is

remarkable that in today’s environment

of corporate activism—and amid other

stakeholder attempts to change the sin-

gle CEO-board chair position—in May

2020, ExxonMobil shareholders voted

to retain the unified CEO-board corpo-

rate governance structure with Woods

securely in that position.

The other side of the argument has

equally vociferous supporters (including

corporate activists) calling for corpo-

rations to split the single CEO-board

chair position. To bolster their position,

these advocates maintain that the

duties and responsibilities of a CEO are

to manage and lead the corporation

by implementing board policies, not

by setting corporate policy. The latter

responsibility is strictly the domain of

the board of directors, led by the board

chair, who evaluates the effectiveness

of the CEO. Thus, the argument for

separating the CEO and board chair

positions evokes U.S. President Thomas

Jefferson’s 1802 letter to the Danbury

Baptist Association (CT) on the separa-

tion of church and state.

Additional rationale for avoiding a

centralized governance structure at

the top includes an excessive amount

of power, overwhelming organizational

control, potential conflict of interest,

unidimensional decision-making author-

ity, and management missteps. An

independent board creates better man-

agerial oversight through a unique sys-

tem of checks and balances that serves

the best interests of all stakeholders.

For example, as a result of the 737

MAX disaster, Boeing, the aircraft and

aerospace manufacturing giant, split

CEO-board chair Dennis Muilenberg’s

position when it appointed David Cal-

houn board chair in October 2019.

Recently, the gray literature has

featured some interesting trends in

splitting the CEO-board chair position.

Spenser Stuart, a leading global exec-

utive search consulting firm, reported

in its 2019 CEO Transitions White

Paper that in 2019 only 9% of newly

appointed CEOs in the S&P 500 were

also appointed board chair—versus

15% of newly appointed CEOs in 2018.

Although a year-over-year analysis may

be inadequate for establishing any

long-lasting trends, it will be interest-

ing moving forward to see the direc-

tion corporations may be heading.

One way of assessing the effec-

tiveness of splitting the CEO-board

chair position is through company per-

formance metrics. Does splitting the

CEO-board chair role help or hinder

company performance? Unfortunately,

the jury is still out. The extant research

has not served this line of inquiry well.

Indeed, the research is often inconclu-

sive or leans positively or negatively in

one direction about the performance

impact and added value of a single or

split CEO-board chair position.

Perhaps the real question should

not be about whether a corporation

should split the CEO-board chair, but

rather about the best mechanism for

doing it. Should changing the corpo-

rate leadership governance structure

follow a revolutionary or evolutionary

approach? If on the one hand, we

endorse a corporate activist’s strategy

and call for the immediate separation

of the unified CEO-board position, we

may encounter a chaotic situation at

the board level. On the other hand, we

may adopt a less radical, more reasona-

ble evolutionary approach; for example,

waiting until the incumbent CEO-board-

chair announces her retirement may

be a more palatable approach for all

stakeholders. We are witnessing this

trend in firms such as Capgemini and

AT&T. With the recent appointment

of Aiman Ezzat as CEO in May 2020,

Capgemini, the global consulting firm,

split the single CEO-board chair role,

with Paul Hermelin, who previously held

the dual position, retaining his position

as board chair. With the retirement of

CEO-board chair Randall Stephenson

on June 30, 2020, communications