Don, Thanks for the comment and for adding to the discussion. I think that it is productive to look at any board in terms of its evolution. I wrote an article focused on the stages – Board of Directors: Cultural Evolution. http://www.dr-smith.info/board-of-directors-cultural-evolution/ You may find that interesting. I would value your comments on it. Dr. Smith

Earl; after attending [member also] of the Orange County [CA] Forum for Corporate Directors, it is clear there is no right or wrong answer. I let my MBA students in on a closely held to the vest secret: that everyone reports to a higher authority. The CEO to the board, the board to the shareholders and the shareholders to their investment strategy. {;o)

Net: governance at any level requires a set of ethical [and moral] responsibilities, where too often, the moral compass is headed TRUE SOUTH. We can thank the likes of movies like WALL STREET for the decay in American value systems where ‘greed is good’. Or as rhetorically I ask my son who is in the securities industry, ‘how much is enough?’

Putting the fox in charge of the chicken coop is only good for the fox – not for the farmer, not for the people who depend on a steady supply of eggs and chickens and certainly not for the chickens.

That said, and personally agreed upon, what about the situation where the board through total incompetence, malfeasance and short-sightedness lets the enterprise wither away until there is little recourse but to sell what assets are still left or liquidate in some form to recoup some of the investment capital?

My contention is that every situation is different and the board had better be sharp enough to do what they are missioned to do. I.E. Concentrate on: strategy, succession planning and risk management and then hold their report-the CEO with feet to the fire.

In my previous company, the CEO and the Chairman were 2 individuals. We changed the CEO 3 times. There were few problems and all solved well for shareholders. But at one point the Chairman and last CEO became friends with “unreasonable” consequences. Both left the company…
I fully agree with you. They should be separate and roles and responsibilities well defined. I’ve found most personal problems in a company arise from two things: lack of well defined boundaries and poor communication.
Oscar

“The mentoring function of Board members is enhanced when there is a separate Chairman”.

While the benefits of the above statement are clear in theory, the practice of such a split in roles is much more difficult to attain essentially due to prestige, ego and holdings in company’s assets (CEOs in SMBs tend to be majority holders of equity in generally what they consider being their business).

During 2009, and focusing on compliance, McKinsey has done extensive research on the role of boards and on the split of duties and responsibilities between Chairman and CEO, and while all their work pointed toward a split of both functions, their surveys have showed the exact opposite picture.

CEOs will fight oversight of their function by the board by becoming their boards chairman et manipulating their board’s agenda to turn it to their advantage. Nobody’s likes to be dictated his marching orders.

The latest compliance concerns, laws, initiatives, etc. are brushed off by either the addition of NEDs to the board (as the public and workers interests watchdogs), or as Peter mentioned, the addition of a second board altogether.
In my view, such “workarounds” cannot work in the long run.

May I allow the myself the quick-and-dirty observation that this discussion is a typical US or anglo saxon cultured biased way of thinking? From a continental european view, this issue is hardly interesting anymore. Almost all larger companies have (depending on size etc even obligatory by law) a Board of Non Exec Directors (independent) and a Board of Exec Directors. Both Boards have their own chairman, but the NED”s form the oversight committee that rules i.a. over final annual reporting, selection of Boardmembers and remumeration. A very well elaborated set of governance rules between these Boards (duties, responsibilities towards all stakeholders, so incl staff, social environment, clients, business relations, share holders etc) are lay down in codes. Of course this is not the panacee to prevent all management problems but it gives way and delivers protocols to discuss all relevant issues from more than one perspective (the view of the CEO/Chair) and helps to prevent tunnel-vision. Outragious bonusses and compensations for the CEO are checked and controlled by the NED’s. Again, not in 100% this model is considered to be the best, but it’s a general accepted thought that a second-level of command could inspire to find more nuances, reflexion and more carefull weighted decisions. The company is not only there for the profit of the share holder, and certainly not the profit of the CEO, but should strive to continuation, social responsibility, embedding within its environment and so contribute to the mutual benefit of workers, management, share holders and society. Its easy to understand that such a multiple role and complex task can not be on the shoulder of one CEO alone. There is no good management without good oversight.

The article “The conflict that keeps on giving” is an excellent one and I agree with the position that there should be a split between Chairman and CEO.

A split between the roles of Chairman and CEO is gaining widespread support as a corporate governance best practice that many business leaders believe should be adopted by more. The results of a report prepared by the Millstein Center for Corporate Governance and Performance – Yale University School of Management. In the report, the Chairmen’s Forum, led by Harry Pearce, outlines the importance of the Chairman-CEO split as a corporate governance best practice.

The Millstein Center March 30, 2009 press release reports that while in the U.K. only 5% of the FTSE 350 companies combine the chairman and CEO roles, over 60% of the S&P 500 companies have boards that are chaired by their CEOs. The press release quotes one commentator as saying that the independent chair model “has been adopted successfully by many companies in many regions of the globe as a means to further ensure and empower board independence.” The Millstein Center report quotes, for example, “About 79% of the biggest British businesses identify an outside chairman in their annual reports.” An interesting case in the UK is that of Marks and Spencers, with Stuart Rose holding both positions until recently, had come under increasing pressure from the shareholders to relinquish the Chairman’s position.

The primary argument made by critics of the Chairman-CEO split as an effective corporate governance best practice is that it dilutes the direction of leadership. Those in favour of a single Chairman-CEO believe it cuts down on power struggles and confusion. Additionally, supporters of the Chairman-CEO split believe the empirical data shows better performance both qualitatively and quantitatively, and that it allows CEOs to focus on running the business while the chairman can focus on duties like leading the board and managing CEO succession.

With corporate governance topics becoming increasingly more important to company shareholders in the wake of significant corporate governance failures across industries, it appears likely that the 15% growth of companies with a Chairman-CEO split in the US since 2002 will continue toward an upward trend.

I am sorry I did not read the article yet but from my experience we have had both successes and failures in this. So…just jotted down a couple of notes (obviously the arguyment is very wide and many valid albeit potentially divergent opinions and experiences will exist)

One critical factor was the innate capabilities of the appointed person. Great vision and leadership will be critical as the helm would be entrusted firmly in his/her hands.

Another is knowing clearly why you want to merge the two roles. We have successfully deployed this strategy as a temporary measure… merging the functions at moments when the organisation will be going through major transformations (merger, complete restructuring in organisation design etc) or when a new organisatiojn is beign set up. frequently, at these moments we need one vision, one leader, one reference point, and minimal ‘conflict’ such as to achieve the focussed, concerted and concentrated effort that is required for success. This will then give way to the ‘normal’ sitation where the two roles are separated once the main thrust of the change process has been implemented (the appointed CEO would have been part and an owner of the lead team so as to ensure continuity and that staff would already identify with th CEO-designate as an authority in the organisation).

In deploying this strategy however, one has to be very careful and cautious of the risks (future power struggles at Board level; lack of authoirty gioven to deisgnate-CEO etc). Timing of the transition (separation of roles is also of essence) is also critical – too early and the change process risks failure. Too late and the CEO would not be recognised by staff as their leader.

As I said, these are a couple of points. There are obviously many more and one needs to assess the realities of their own organisation to establish if the merging of the roles (temporarily or permanently) is of benefit or else represents more of a risk.