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Management article
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Reference no. SMR46214
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2005
Length: 6 pages

Abstract

Recent corporate scandals have made many US boards question the wisdom of combining the chairman and CEO positions. But a knee-jerk decision to adopt the British model of separating the two top jobs without understanding the model''s complexities is hardly the answer. Corporate governance across the Atlantic has its own characteristic problems. For example, although a separate chairman makes the board more independent of the CEO, the arrangement can lead to confusion regarding the company leadership. And a poor relationship between the chairman and CEO can easily lead to conflicts and power struggles. US boards need independent leadership, but achieving such leadership by splitting the two positions is not necessarily a clear improvement over the US model. Instead, the authors argue, for most large US companies, the addition of a competent lead director or presiding director will likely strike the right balance between effective governance and leadership.

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Abstract

Recent corporate scandals have made many US boards question the wisdom of combining the chairman and CEO positions. But a knee-jerk decision to adopt the British model of separating the two top jobs without understanding the model''s complexities is hardly the answer. Corporate governance across the Atlantic has its own characteristic problems. For example, although a separate chairman makes the board more independent of the CEO, the arrangement can lead to confusion regarding the company leadership. And a poor relationship between the chairman and CEO can easily lead to conflicts and power struggles. US boards need independent leadership, but achieving such leadership by splitting the two positions is not necessarily a clear improvement over the US model. Instead, the authors argue, for most large US companies, the addition of a competent lead director or presiding director will likely strike the right balance between effective governance and leadership.

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