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Wednesday, 11 February 2015 04:18

Chairman-CEO Structure - Comparing Combined versus Split Featured

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Here is some additional comparison and analysis of the 61 companies with Chairman and CEO roles combined at the end of our analysis period versus the 39 companies with roles split.

The combined companies are on average a little larger in terms of revenue. Their average F100 rank is 47, the split roles companies 53 (with the higher number indicating smaller company size). The medians are 48 and 52. The roughly 60/40 proportion of combined/split holds for the F10 and F20; however, with the exception of Walmart at #2, the seven largest companies have roles combined.

When we look at the other quintiles of the F100, we find that combined companies dominate the middle (#41-60) 85% to 15%, while split companies are the majority of the smallest quintile (#81-100) with 55%.

Also interesting are the variations across our six categories. As the chart shows, the median rank of the Single Split companies (71) is significantly higher than the others. And the lowest median rank belongs to the companies with complex changes. We conclude that smaller companies are more inclined or able to split roles, and that large size has its challenges, including with leadership structure and transition.

Figure 4: Combined vs Split by Median Fortune Rank

When making size comparisons, keep in mind that, though these are all large corporations, the range across the F100 is also large. The two biggest companies (Exxon Mobil and Walmart) had annual revenues of around $450B, the next two (Chevron and ConocoPhillips) around $250B. Then it’s a $100B drop to General Motors at #5, where the distribution starts to even out. The largest company is about 15 times the size of the 100th.

Looking at industry distribution, we find that manufacturing and industrial companies are more likely to have roles combined, as are consumer goods and transportation. Somewhat surprising is that health sector companies tend to be combined, but note that they include large pharmaceutical and distribution companies as well as health providers, insurers, and benefits managers.


In technology, retail, and food production, a majority of the companies have roles split. Energy/Chemical and Financial Services/Insurance are close to the F100-wide 60/40 split. Splits during the financial crisis created the current balance in financial services.

Figure 5: Combined vs Split by Industry

As we noted earlier, companies with combined roles have on average been more stable in terms of both the number of CEO transitions and the ability to promote from within.

Currently combined companies average 1.5 CEO transitions between 2000 and 2013, currently split companies 2.0. The Always Combined companies averaged less then one. Across all currently combined companies, insiders succeeded to the CEO role 90% of the time. Across all currently split companies, it was 68% of the time. Note that we’re tracking the overall tendencies of these organizations, and some of the transitions occurred before they adopted their current leadership structures.

The next chart underscores the point by comparing the distributions of the number of times the CEO role turned over. Among the combined companies, there are eight outliers with three or more CEO transitions (two in the Complex Changes group). 87% had two transitions or fewer. The proportion is higher among the split companies, where 33% have had three or four CEO transitions.

Figure 6: Combined vs Split by Number of CEO Transitions

It might be the case that having the Chairman and CEO roles combined would make it easier to attract a very strong CEO from outside. However, combined companies – and especially the Always Combined – have little CEO turnover and rely on strong internal succession planning.

Read 338 times Last modified on Friday, 17 July 2020 11:33
Dora Vell

Dora Vell is the Managing Partner of Vell Executive Search, a boutique executive search firm in Boston focused on recruiting technology executives and board members. Vell has successfully completed numerous board member and C-level executive searches, including CEOs, COOs, CIOs, and Vice Presidents - at both public and private companies.

Prior to founding the firm in 2005, Vell was a Partner at Heidrick & Struggles' Technology practice for seven years.  Before her career in executive search, she worked at IBM for 11 years, managing software engineering organizations of 100 people and software sales organizations with revenues of $150 million. She has also served as an executive assistant to the CEO of IBM Canada for one year.

Vell holds seven worldwide software patents. She has published several Business of Leadership reports on governance and leadership and has been quoted in numerous articles including The Wall Street Journal, Forbes, Business Week, Fortune, Agenda Week, MSNBC, Mass High Tech, the OPUS for the World Economic Forum, Boston Business Journal, The Globe & Mail, CIO Magazine, and IEEE. She also has been a featured speaker on leadership at numerous conferences and at Columbia University's MBA program.

Vell is a member of the National Association of Corporate Directors (NACD), the Boston CEO Roundtable. She has served on the boards of Framingham State, Entrepreneur's Organization, Goodwill, Mary Centre for developmentally handicapped adults, garage.ca, and RBC Capital Partners.

She has received an MBA from the University of Toronto, a Master in Computer Science from the University of Waterloo, and a Bachelor in Computer Science from Carleton. She has also completed the MIT Entrepreneurial Master’s program.

www.vell.com

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