Separating the board chair and CEO roles remains an ongoing debate in corporate governance with compelling arguments on both sides. The issue centers around whether a potential conflict of interest exists when the roles are combined and whether there is an appropriate balance of power between the CEO and the independent board members. As of 2012, 43% of S&P 500 boards currently separate the role.
Investors and a growing number of directors have focused on separating the roles over the past year. Shareholders submitted independent chair proposals at 48 Russell 3000 companies in 2012, a significant increase from the 23 proposals submitted in 2011. The average support level for such proposals rose slightly, from 33 percent in 2011 to 36 percent in 2012. Despite increased levels of average support, independent chair proposals only received a majority of votes cast at three of the 48 companies.
Of the companies that have a combined chair and CEO, about half of those boards are already discussing possibly splitting the role at their next CEO succession, according to PwC’s 2012 Annual Corporate Directors Survey. The prevalence of these conversations suggests many directors are reevaluating their board leadership structure -- perhaps in response to continued shareholder activism against combining the role.
“In our view, boards are best positioned to determine the appropriate leadership structure for their companies' specific situation. That said, a CEO transition provides a good opportunity for the board to consider whether there should be a change in board leadership structure.”
— Catherine Bromilow, Partner, Center for Board Governance
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