Joint CEO/Chairman Conundrum Puzzles Us Shareholders

Executive Management | In light of a shareholders’ vote on September 22 as to whether Bank of America chief executive officer Brian Moynihan should remain chairman as well, the debate about whether the two roles should be separate rages on in the United States.

And the pros and cons are subtler than they might at first appear.

Elsewhere, most countries seem to have put paid to the issue.“In Europe, the decision was made a long time ago to have a separate chairman, and almost every company has one,” says Jay Lorsch, a professor of human relations at Harvard Business School.“This is also true in Canada, in Australia and in most Asian countries.”

Nevertheless, variations do occur. “The EU has generally had more participative governance models for decades,” says Matthew Semadeni, associate professor of strategy at Arizona State University’s W.P. Carey Business School. “But many other countries favor the unity of command approach, and yet others favor family governance models.”

With plenty of data supporting either approach, a growing toolkit of available options is taking shape. “I don’t see a lot of governance change internationally,” says Semadeni.“But I do expect governance models to evolve significantly over the next decade in the United States.”

For this to happen, the discussion must develop with the times. “Unfortunately, I believe much of the debate is mired in the logic of the 1980s, when the CEO and chair roles were different,” continues Semadeni. “Now, with the complexity of both roles, it is often in a firm’s best interests to join them, and at other times to separate them.” In other words, more flexibility is needed as the ideal setup varies from case to case.

“In recent years we’ve seen in the United States a slow movement toward the European model of a separate chairman,” says Lorsch.“But I think that has somewhat stopped.” Increasingly, American companies are looking for a third way, relying for independent oversight on a separate lead director in those cases where the CEO and the chairman are one and the same.