Combined Chairman/CEO Roles: Easier Than You Think

March 11, 2014

In our work with shareholders and boards of directors, one question that has come up more than once in the last few months is “Should the chairman/CEO roles be split?” The common wisdom is that separating the roles serves up a better governance structure for shareholders because it provides a better balance of power. Further, the view is that the combined format has declined from almost 75 percent of S&P 500 companies having the combined roles in 2004 to just under 60 percent today and that, given this trend, we are inexorably headed to the minority having combined roles in the future. After all, this has been the corporate reality in Europe. And we have seen some very visible and acrimonious battles waged around splitting the roles.

Take, for example, the battle at JP Morgan Chase that occurred last year. At JPMorgan Chase, shareholders rejected a proposal to separate the roles with a 69 percent “against” vote. Anecdotally, one governance analyst told me that his firm voted against the shareholder proposal because JPMorgan had delivered great returns, in part due to Jamie Dimon’s leadership. Last week, shareholders withdrew a petition to vote, for a third time, on splitting Dimon’s role at JP Morgan Chase’s upcoming annual meeting. However, the outcome was different for Chesapeake Energy (CHK), where the returns were poor and corporate governance was questionable.  In this case, shareholders demanded that the company separate the roles.

It would seem that it’s easy for shareholders to argue for and win the case for splitting the roles. After all, a concentration of power in the chairman/CEO roles could contribute to limited accountability and a lapse in corporate governance. But not so fast. My team at Farient found that even when investors succeeded in getting a proposal on the proxy ballot for a separation of roles, they usually didn’t succeed in getting the proposal passed or in effectuating a change. So the odds are stacked against investors in forcing a change through the proxy voting process.

To put facts on the table, we analyzed how many shareholder proposals for split roles made it on to proxy ballots, and of those, how many passed. We discovered that approximately 200 proposals to split the chair/CEO roles were filed by shareholders in the last two years, and of the 200 proposals filed, only four non-binding proposals, shown below, won shareholder approval. Further, of these four, none ended up splitting the chairman/CEO roles.

Issuer Responses to Non-Binding Shareholder Votes to Separate Chair and CEO Roles



% For

Company Response


Combined Chair/CEO Role

Lead Independent Director (LID)



53 %

  • Strengthened LID role based on shareholder engagement
  • Did not receive shareholder proposal in 2013



Sempra Energy


51 %

  • Strengthened LID based on shareholder engagement
  • In 2013 shareholder proposal failed (18  FOR)





51 %

  • In 2011, Founder CEO retired
  • In 2012, successor CEO retired and founder again served in both roles
  • In 2013 shareholder proposal won (56 percent FOR)
  • Vornado did not Yes respond to this vote





52 %

  • No response
  • No subsequent shareholder proposal




We also found that even for highly visible companies, shareholder proposals failed to win majority support to separate their chairman/CEO roles. What’s more, even if shareholders prevailed in splitting the roles, companies sometimes recombined the roles later on. Take The Walt Disney Company, for example. The company sustained a high-profile separation of chairman/CEO roles in 2005, but in 2012, it recombined the roles under the leadership of a different CEO. In 2013, Disney shareholders rejected a proposal to separate the roles with a 65 percent “against” vote. In its recommendation to vote against the proposal, the board argued that its lead independent director (LID) ensured adequate oversight over the CEO and management team.

Which brings up another interesting point. Many companies have created the LID role as an antidote to splitting the roles. Farient’s research shows that the majority (almost 60 percent) of companies in the S&P 500 reported having an LID in 2012. Shareholders say that they view companies with an LID more favorably because of the leadership, governance and oversight strengths they bring to the boardroom. The LID typically is responsible for setting the board agenda, calling executive sessions that exclude the CEO and building a constructive, but arms-length, relationship with the CEO.

Finally, through our research, we have identified studies that have been conducted (most notably by Krause and Semadeni at Indiana University’s Kelley School of Business) that the decision to separate the board chairman/CEO roles can significantly impact the future performance of a company. For poor performing firms, separating the chairman/CEO roles can provide a significant boost to shareholder value, but for high performing companies, separating the roles can have a negative impact on shareholder returns. As a result, shareholders are disinclined to rock the boat at high-performing firms.

At the end of the day, we have seen an inexorable shift from combined to separate chairman/CEO roles in large U.S. companies. Further, we are about to reach a tipping point in which those companies with separate roles will soon outnumber those with combined roles. However, this shift is more attributable to indirect rather than direct pressure from shareholders since the success rate in splitting the roles through proxy proposals is low. Really, each board must determine whether combined or separate chairman/CEO roles is right for its company. Shortfalls in performance, poor governance practices, an “imperial” CEO, increase in board attrition, and the lack of a strong LID all may be harbingers of change, indicating that it is time to split the roles. However, absent these indicators, boards and shareholders alike are, for good reason, reluctant to rock the boat.

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