Ten companies have had Chairman and CEO roles split since the beginning of 2000 (or since being spun out in the case of Marathon Petroleum). Walmart is the only one among the 20 largest U.S. corporations that has maintained split roles; a Walton family member serves as its long-time Chairman.
On average, these companies have had more CEO transitions (1.8) than those that have kept the roles Always Combined, but it’s the same frequency as the Combined with Transitions companies. They are also more willing to bring in outsiders as CEOs: 22% of the time as compared with only 6% across the Always Combined and Combined with Transitions companies. The most recent CEO appointments at CHS and TIAA-CREF were outsiders with deep experience in the industry. CEO transitions in these organizations tend to be planned and orderly.
These companies have designated Lead Directors whenever the Chairman is an insider, not an independent director. Two of the companies have special structures that determine leadership roles. CHS was formed as a food production cooperative. Its board, including the Chairman, is made up of leaders of member producers, with regional representation. TIAA and CREF have their own boards, and the CEO of TIAA-CREF reports to both.
Table 4: Always Split
* Since spun off from Marathon Oil in 2011. Marathon Oil had roles split since 2002.
** Former CEO, now designated as independent, serves as Chairman.
What the Governance Guidelines Say
Most of these companies mention Chairman-CEO role structure in their governance guidelines, as well as making provisions for appointing Lead Directors when the Chairman is not independent.
- AmerisourceBergen’s guidelines say simply that “The Board shall select a Chairman of the Board, who shall be an independent member of the Board.” A recent proxy statement says, “We believe that having a non-executive Chairman of the Board emphasizes the importance of the Board's objectivity and independence from management and best promotes the effective functioning of the Board's oversight role.” But their guidelines also call for the CEO to chair the board’s executive committee.
- Intel’s guidelines say: “The Board’s general policy, based on experience, is that the positions of Chairman of the Board of Directors and Chief Executive Officer should be held by separate persons as an aid in the Board’s oversight of management. If the Chairman of the Board is not an independent director, the Board will appoint an independent director to serve as Lead Director.”
- Walmart states both a preference and the obligation to revisit it: “The Board has a policy of separating the offices of Chairperson of the Board and Chief Executive Officer (“CEO”). The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make the determination when it elects a new chief executive officer whether to continue this policy.”
Three more of the companies – Costco, Marathon Petroleum, and Murphy Oil – leave it to the board to determine the best leadership structure (as do most companies with roles combined). However, Murphy Oil affirms its split structure: “The Board believes that separating the roles of Chairman and Chief Executive Officer is currently in the best interest of stockholders because it provides the appropriate balance between strategy development and independent oversight of management. The Board will, however, maintain its flexibility to make this determination at any given point in time to provide appropriate leadership for the Company.”
Marathon Petroleum makes the appointment of a Lead Director optional: “In the event that the role of the Chairman of the Board is filled by the CEO, the Board shall consider appointing a non-management Director (a “Lead Director”) to preside over meetings of the Board.” And the company has a provision for a Presiding Director if the Chairman is unavailable.
In recent years public confidence in board independence has been undermined by an array of scandals, fraud, accounting restatements, options backdating, abuses in CEO compensation, perquisites and special privileges. These issues have highlighted the need for boards to be (and to be perceived as) fully independent, cost conscious, free of conflicts, protective of shareholder interests and capable of objectivity, toughness and independence in their oversight of executive management. In order to ensure independent oversight, TIAA-CREF believes that the separation of CEO and chair or appointment of a lead independent director is appropriate. In addition to disclosing why a specific structure has been selected, when the CEO and chair roles are combined, a company should disclose how the lead independent director’s role is structured to ensure they provide an appropriate counter balance to the CEO/chair.