Corporate Governance and Separating the Board Chairperson from the Chief Executive Officer

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Corporate Governance and Separating the Board Chairperson from the Chief Executive Officer

Numerous reports on corporate governance have emphasised the desirability of increasing the number of outside directors on boards. An equally important and related issue is a growing insistence that the role of chairman and chief executive should be separate, though on this issue there is less unanimity in the U.S. than in other countries.

Choosing the right Chief Executive officer is the key task for the board of directors. Pressure on chief executives to perform in ever decreasing time frames makes it essential that the CEO and the Board work closely together. An effective chief Executive will drive company strategy, lead the top team and fulfill shareholder ambitions . A good CEO will transform Board dynamics by keeping an open line of communication, placing a high value on Board input, and promoting the belief that management and the Board is working toward common goals.

The average Board size is between eight and nine members. It used to be that Boards were constructed of executives with one or two non-executives; but trends are swiftly driving executives out of the boardroom as even the CEO’s familiar role as chairman has been called into question. There has been a notable shift from executive director to non-executive director in the boardroom.

The supposed advantages to these changes are to provide greater board independence from management, greater objectivity, and a representation of multiple perspectives. Bosch believes that the fundamental principle underlying this composition is accountability; if you have strong independent directors, a separation of the Chair/ Chief executive role will safeguard accountability ....

... middle of paper ... is not possible to draw a positive conclusion in addressing this issue. There are apparently numerous factors involved, and so many conditions that apply, it seems that a firm would have to base their decision on the dynamic existing among executive management and the board members.



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