Dennis Philip is Reader in Finance at Durham University Business School. This post is based on a recent paper authored by Dr. Philip; Nihat Aktas, Professor of Finance at WHU Otto Beisheim School of Management; Panayiotis C. Andreou, Assistant Professor of Finance at Cyprus University of Technology; and Isabella Karasamani, Lecturer in Accounting and Finance at the University of Central Lancashire, Cyprus.
When a sole individual acts as both CEO and chair of the board of a firm, the resulting CEO duality creates one of the most contentious issues in the field of strategic leadership (Dalton et al., 2007; Finkelstein et al., 2009). While the global financial crisis triggered a wave of proposals to eliminate CEO duality and achieve independent board leadership, corporate leaders and associations appear reluctant to adopt such an obligatory separation that suggests a “one size fits all” approach (Krause et al., 2014). Companies such as Bank of America, Citigroup and a number of other largest US banks chose to separate the two roles after a series of shareholder proposals demanding that they split the top jobs. Contrarily, Exxon Mobil refused to separate the two roles after the eleventh consecutive year of shareholder proposals, emphasising the cohesive leadership deriving from the combination of the roles. The Walt Disney Company recombined the two roles after splitting them for a period of time. Even as recent years have witnessed a tendency by firms to separate their CEO and chair positions, the majority of firms included in the S&P 1500 index continue to be governed by dual CEOs. In particular, the percentage of firms with dual CEO-chair roles at times reached as high as 65% in the early 2000s and has rarely dropped below 50% in more recent years. [1] These trends show that there are still questions about which leadership structure is the most effective.