One of the most controversial issues in corporate governance is whether the CEO of a corporation should also serve as chairman of the board. In theory, an independent board chair improves the ability of the board to oversee management. However, an independent chairman is not unambiguously positive, and can lead to duplication of leadership, impair decision making, and create internal confusion — particularly when an effective dual chairman/CEO is already in place.
In this Closer Look, we examine in detail the leadership structure of publicly traded corporations and the circumstances under which they are changed. We ask:
- What factors should the board consider in deciding whether to combine or separate board leadership?
- How can the board weigh the tradeoffs between stability of leadership, efficient decision making, and decreased oversight?
- What structure should be the default setting for a corporation?
- Why do activists advocate that corporations strictly separate the roles when there is little research support for this position?