The primary duty of a board of directors is to monitor the management of a company on behalf of its shareowners. But a CEO who also serves as chair can exert a dominant influence on the board and its agenda, thereby weakening the board’s oversight of management.
Separating the chair and CEO positions avoids that fundamental conflict of interest. An independent board chair provides a better balance of power between the CEO and the board and supports strong, independent board leadership and functioning.
That is why the Council has long advocated that boards should be chaired by an independent director. Only in very limited circumstances should the CEO and chair roles be combined. In such cases, the Council believes, 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.
New disclosure rules that the Securities and Exchange Commission (SEC) approved in 2010 require companies to disclose, in their proxy statements, detailed information about their board leadership structure. The disclosures must include an explanation of why the board chose to combine or separate the chief executive and chairman 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.
Prevalence of Independent Board Chairs
Shareowner Support for Independent Chairs
