A CNNMoney/Fortune article today titled “Why the CEO-chair split matters” reports on how a group of union retirement funds believes that CEOs should not also serve as chairman of the board at their companies because it is a conflict of interest. Here’s my take on it.
I understand why many people find it an appealing idea to separate the position of CEO and Chairman. We are always uncomfortable if one person appears to have too much power. I think many people who push this idea believe it limits the power of the CEO. In practice however, this is not really the case. Unless the Chairman is a full-time active manager in the company, he or she will not have the information necessary to “manage” the CEO.
If he is a more active manager, in which case the title Executive Chairman is often used, then you have the same situation with the Executive Chairman as you did with the Chairman/CEO. For a company to work well, the buck has to stop somewhere, and in my opinion that should be with the CEO. The board should closely monitor and provide oversight but shouldn’t be involved in day-to-day decisions.
If things are happening that require the board to intervene, then generally that is a good sign that there needs to be a change in the CEO position. Whether the CEO is also Chairman of the Board makes little difference in the way a company should operate.