Crises push number of corporate giants separating CEO, chairman roles to record level

The number of U.S. companies that separate CEO and board chairman roles has once again reached record levels, but the move at several of those companies has come as a response to a crisis, according to The Wall Street Journal.

About 53 percent of the companies in the S&P 500 index have split the CEO and chairman roles, data from proxy advisory firm Institutional Shareholder Services shows. This matches the figure from 2017, when 53 percent also had split CEO and chairman roles, and is a jump from the 35 percent of companies who did the same in 2009.

After two fatal Boeing airplane crashes this year, the airline stripped CEO Dennis Muilenburg of his chairman role. Similarly, WeWork, which is in the midst of a financial bailout, recently ousted its CEO and Chairman Adam Neumann, and its newly selected chairman is searching for an outside hire to take on the CEO role.

Rosanna Landis-Weaver, a program manager at nonprofit investor advocacy group As You Sow, told the Journal that separating the CEO and chairman roles in the face of a crisis is "low-hanging fruit to appease the shareholders."

When the roles are combined, it creates a situation where the CEO is not accountable to anyone, as typically, the chairman leads the board which oversees the CEO and the management team. By separating the roles, companies hope to increase accountability of management and ensure board independence.

But the separation is not necessarily the best leadership structure to bring a company through a crisis, Espen Eckbo, director of a corporate governance research center at Dartmouth College's Tuck School of Business in Hanover, N.H., told the Journal. While there is some evidence showing a separation of CEO and chairman roles is linked to higher shareholder returns, Mr. Eckbo cautioned against assuming a cause-effect relationship between the two.

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