A Foregone Conclusion?

January 6, 2010 at 3:20 pm 2 comments

One of the prevailing themes in corporate governance right now is the recommendation of splitting the roles of Chairman and CEO in corporations. Much of this discourse has come as a result of the dismal business environment we have been living in of late. It is now being advocated that splitting the Chair from the CEO role improves corporate governance and ultimately business performance. In fact, in a recent report prepared by the Millstein Center for Corporate Governance and Performance at Yale University’s School of Management, the Chairmen’s Forum proposes that companies appoint a separate chairman after an incumbent CEO-chairman leaves — or explain why not to shareholders.

But how far can this alteration go in solving the problems that have plagued corporate America in the past few years? In an attempt to gain some insights I decided to look at the organizational structure of those companies that are presently thriving. Those that have succeeded in spite of the obstacles recently.

Businessweek/A.T. Kearney recently published the 2009 list of the World’s Best Companies. This list was created by looking at 2,500 of the largest public companies in the world. These companies were then ranked on their sales growth and value creation—the rise of market capitalization after subtracting any increase in capital—over the past five years. The result is a list of 40 companies from 18 countries. Admirably, fourteen of these companies are based in the United States. What is surprising however, about the results is the prevalence of combined Chairman/CEOs leading this group. Of the fourteen American based companies on the list, 11 of them have CEOs that are also the Chair of the company. These companies include such favorites as Google, Monsanto, Amazon and ExxonMobil. The three American based companies that have separate CEOs and Chairs are Apple, Jacobs Engineering and Oracle.

So what is this snapshot telling us about the currently popular structural panacea that is all the rage? Clearly, there is more to the equation than simply splitting the role of CEO and Chairperson. Evidently there are numerous extremely successful companies that grow and profit EVEN with a combined Chairman/CEO in place. While this is by no means a scientific examination, it does clearly suggest that more elucidation and diagnosis is needed. It would be extremely interesting for example, to understand how these eleven boards interact and function with their combined Chairman/CEO. How do they overcome the numerous conundrums that have been suggested as reasons for splitting the role?

I believe that the real conclusion that should be drawn from these results is that (a) there is no “one size fits all” organizational structure (b) we need to look at companies and their leadership on a case by case basis in order to determine what the boardroom should look like and most importantly (c) we must be wary of suggesting quick-fixes for very complex and still somewhat opaque problems.


Entry filed under: Business, Corporate Governance.

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  • 1. Strategies  |  January 9, 2010 at 1:53 am

    Sometimes it’s really that simple, isn’t it? I feel a little stupid for not thinking of this myself/earlier, though.

  • 2. roulett  |  January 10, 2010 at 2:55 am

    Great idea, but will this work over the long run?


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