Council of Institutional Investors

Independent Board Leadership

CII's corporate governance policies advocate that boards should be chaired by an independent director. Only in very limited circumstances should CEO and chair roles be combined. In those situations, the board should provide a written statement in the proxy materials that discusses why a CEO-chair is in the best interests of shareowners, and it should name a lead independent director who approves the flow of information to the board, meeting agendas and meeting schedules. The majority of S&P 1500 companies have a lead director, though the range of responsibilities attached to the title varies by company.

Having an independent chair helps the board carry out its primary duty—to monitor the management of the company on behalf of its shareowners. A CEO who also serves as chair can exert excessive influence on the board and its agenda, weakening the board’s oversight of management. Separating the chair and CEO positions reduces this conflict, and an independent chair provides the clearest separation of power between the CEO and the rest of the board.

The Securities and Exchange Commission requires U.S. public companies to disclose in their proxy statements detailed information about their board leadership structure. The disclosure must include an explanation of why the board chose to combine or separate the chief executive and chair positions and why it believed this was the most appropriate structure for the company at that time. If the roles are combined, the company must discuss its decision regarding the designation of a lead independent director.

Resources & Advocacy
CII corporate governance policy on independent board chairs

Correspondence
Feb. 24, 2014        CII letter to Industry Canada regarding its Consultation on the Canada Business Corporations Act