Age Old Debate: Separating the Offices of Chairman & CEO

The question of whether the offices of chairman and CEO should be separated has long been debated.  British and European companies have long kept the offices separate, and that begs the question of whether we should do the same in the United States.

The more basic questions are:  What are the respective roles of the chairman of the board and of the CEO?  When can these roles conflict?

In normal times, when a company does not face certain transformational exigencies, the question becomes whether the independent directors under a joint chairman/CEO leadership model really have the opportunity to express their views, set agenda items, and have unlimited discussion and debate on topics which are important to them.

Over the last several years, a few things have happened to make sure that this problem does not arise.  For example, boards routinely now have executive sessions without the management directors present, in which there can be a free-flowing, unfettered discussion.

However, there are other situations in which the board has a role very distinct from that of management.  The most obvious is when the company is up for sale, and there is a potential for a management buyout of the company.  Clearly, in that situation the best interest of management can easily conflict with the best interests of the rest of the shareholders, and it is appropriate in such a situation for a non-executive, non-management chairman of the board or a non-management lead director to lead the board in the role that is uniquely that of the non-management directors..

When you look at this issue along the lines of the responsibilities of board and of CEO and of the circumstances that the company faces, then boards can make an informed, good-faith decision on what type of leadership structure is best for them.