Chairman vs CEO
Splitting the Roles - Chairman vs CEO.
Photo Credits: Sameer Randhawa
The global meltdown has brought about many changes in corporate companies. One of them is the hotly debated question whether the Chief Executive Officer should be the same as the Chairman of the company. Should their responsibilities be defined by various parameters and if so, to what extent they would be applied.
Chairman vs CEO – Dual Responsibilities.
Not too long ago, a global bank’s shareholders favored the unified form of responsibilities. The CEO in question had succeeded in firming up his dual position. It it is not lost on anyone that several companies that separated the two responsibilities are displaying a declining graph.
Chairman vs CEO – Different Opinions.
It is not unusual to find shareholders who hold that the independence of a board is curbed by a single head holding both the responsibilities. On the other hand, company executives opine that a unified role automatically means a strong leadership and such leadership is bound to inculcate increased efficiency. Out of all the major banks, for instance, only a couple of banks do not boast of a unified chairman-cum-CEO. However, it is true that many banks which saw a complete rout before the financial let-down had the chairman doubling as CEO. Such enormous debacles saw vociferous opposition emerging forth and gaining ground.
Chairman vs CEO – Structures and Changes.
Some solid economies around the world see the merit in separating the responsibilities. One can think of South Africa and the U.K. In the U.S. too, the Securities and Exchange Commission has informed the companies that they needed to give details about the structure of the board in the company and asked them to furnish the reason why the particular structure is the most apt for the company.
Chairman vs CEO – Pros and Cons.
It is a valid point that the separated responsibilities will mean lesser work load for each and that will result in more efficiency. But, one has to agree that a unified job comprising both titles will mean up to date knowledge in one person. An urgent decision can be taken without the need for a discussion. Unnecessary disputes can also be done away with.
Chairman vs CEO – To each his Own.
Interestingly, the board, more conspicuously the chairman, has the responsibility of hiring or firing a CEO. This job is not equivalent to managing container for storing chemicals. The general oversight of management and various affairs of the company is the prerogative of the board. If the same person is the CEO as well as the chairman, a conflict of interest will more likely than not arise. Whereas, an independent chairman is independent of the duties and responsibilities of the CEO and can go ahead with the implementation of the board’s decisions.
Discussions in various forums at various levels have indicated that the question is not easy to solve. The safe way out seems to be to follow the rule of thumb. If a company has long had a CEO/Chairman without anything untoward happening, the company might decide to stick to the practice. A corporation that is going through a hard time may want to experiment by splitting the responsibilities. A diligent action is what is desirable in either case.
Take a look at the highest paid CEOs – many take on both of these roles.
James Pallot is a buyer for a family owned food importing business in Sydney. He rents a container building to use as storage all year round.