In a challenge to prevailing wisdom that CEO and board chair
positions should be held by two different people as "best practice,"
new research indicates that the roles should be split only when there is a
performance problem, and then only through a "demotion strategy" that
keeps the CEO but brings in an independent chair, as an overt signal to reverse
course.
This is the primary finding of a study from the Indiana
University Kelley School of Business that is the first to identify the distinct
performance consequences of three approaches to CEO-chair separation:
apprentice, departure and demotion. The findings buck current recommendations
of legislators, governance experts and analysts seeking to establish separate
CEO-chair roles as standard practice. These efforts have gained some traction:
Since the 2002 passage of the Sarbanes-Oxley Act, the number of S&P 500
companies dividing the roles has dramatically increased to 43 percent from 25
percent.
journal reference (abstract free): amj. Academy of Management >>