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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Combined versus Separate Chairman and CEO

In theory, it's difficult to argue that both hats should sit on the same head. The board of directors is designed for and charged with responsibility for overseeing the corporation, including management, so it seems incredible that a CEO running a company should be overseen by himself or herself as board chair. Certainly at board meetings a joint chairman-CEO has the ability to determine or strongly influence what the agenda will look like and the direction of discussion in the boardroom.

It's worth noting how the power structure evolved, including whether the role of the board of directors has been primarily advisory or monitoring. For decades, many company boards mainly provided advice and counsel to the CEO and senior management. This was due to a number of factors, including the rise of an imperial CEO who also served as board chairman and handpicked fellow board members, many of whom were friends and themselves former CEOs. Key executives in the C-suite also had board seats as well. As such, considerable power was consolidated in the hands of the chief executive.

But that model began to evolve, and with Enron, WorldCom, and other governance failures, along with the Sarbanes-Oxley Act and investor activism and related events, the pendulum shifted. Board composition changed, monitoring management became a greater priority, and impetus for separating the chairman and CEO roles grew.

There's been a clear trend toward separation over the ...

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