TheCorporateCounsel.net

July 21, 2022

Board Governance: Dual Chair & CEOs on the Decline?

According to a recent Fortune article, it looks like the idea of separating the roles of CEO and Board Chair is gaining more traction among public companies.  Here’s an excerpt:

A growing share of companies are tapping independent directors to hold the chairman seat, according to a new survey from The Conference Board using data from ESGAUGE, and shared exclusively with Fortune. The percentage of S&P 500 companies that combine the board chair and CEO roles dropped from 49% in 2018 to 44% in 2022, while the percentage of companies with an independent board chair increased from 30% to 37% in that same time frame, according to the report.

Conventional wisdom says the more directors who are not affiliated with the company, the better because it decreases potential conflicts of interest and better positions boards to maintain objectivity when making executive decisions. These days, companies are even more inclined to separate CEO and board chair duties because of directors’ increased workloads.

The percentage of companies splitting the two roles seems to be heavily weighted toward small caps.  The article says that 55% of companies with $50 billion or more in annual revenue have the same person serving as CEO and Chair, but only 25% of companies with annual revenue under $100 million combine the two positions. (h/t The Activist Investor)

John Jenkins