Separation of Chair/CEO Roles

by Barbara Blackford

The decision of whether or not to separate the chair and chief executive roles remains a hot governance topic for public companies, boards, and shareholders.  While the number of companies separating the roles of board chair and CEO has grown significantly over the past five years, it is not yet a majority practice in the US.  According to The Conference Board's 2011 Director Compensation and Board Practices Report, approximately 50% of nonfinancial services companies in the US separated these roles, with less than 65% of those companies having an independent board chair.

The Chairmen's Forum, a group of prominent current and former chairs of corporate boards from the United States and Canada, recently issued a model statement regarding the separation of chair and chief executive roles.  Under this model, boards are urged to adopt a policy requiring a separation, independent board chair.  In its release, the chairman of the Chairman's Forum, Bill McCracken, noted that "Corporate directors should prepare now for next-generation leadership, which involves building companies through strong and constructive boards led by independent chairs.  . . . The Chairmen's Forum sees succession as the inflection point in moving to a fresh model of board leadership. This policy language offers a clear way for directors to put this fresh model into practice and reflects an emerging standard."

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