Fifteen companies have gone back and forth in splitting and combining the roles of Chairman and CEO. Eight of them currently have roles split.
In one, Humana, this came about through a purposeful decision to combine the roles, then a split as part of an executive transition. The roles had been split since 1997, when the founder, David Jones, retired as CEO but remained Chairman. In 2010, the board determined that, given the current challenges faced by the company, “the appropriate leadership structure for our Board is a combined Chairman and Chief Executive Officer, complemented by a strong independent Lead Director.” CEO since 2000, Michael McCallister assumed the Chairman role as well, and long-time board member Kurt Hilzinger was appointed Lead Director. McCallister, then 59, retired as CEO at the end of 2012 and was replaced by a groomed successor, Bruce Broussard. Effective January 2014, McCallister chose to retire as chairman and from the board, and Hilzinger was elected Chairman. It is unclear why McCallister’s tenure as Chairman was short lived, after twelve years as CEO.
The other seven companies that are currently split have undergone repeated leadership changes and/or business turmoil.
Tyson Foods. John Tyson has been Chairman since 1998. When CEO Wayne Britt resigned in early 2000 after a brief and unsuccessful tenure, Tyson added the CEO role. He held both roles until 2006, when he relinquished the CEO role to Richard Bond, a Tyson executive since 2001. Bond resigned amid an industry slump in 2009, reportedly in a disagreement over strategy with the dominant shareholder, the Chairman’s father, 78-year-old Don Tyson. The elder Mr. Tyson controlled 70% of the voting shares. A former Tyson CEO stepped in on an interim basis, and current CEO Donnie Smith was appointed late that year.
Ford. When Chairman and CEO Alex Trottman retired at the beginning of 1999, the roles were split between Bill Ford as Chairman and Australian Jacques Nasser as CEO. The company experienced quality issues and business losses, and Bill Ford consolidated power by assuming both roles in late 2001. In 2006 and in need of a turnaround, the company brought in Boeing executive Alan Mulally as CEO. Ford remains Executive Chairman. Wall Street Journal analysis at the time said that Ford recognized that he was simply trying to fill too many roles.24 The subsequent turnaround at Ford has been dramatic.
Sanford Weill was Chairman and CEO from the formation of Citigroup in 1998. He resigned the CEO position at the end of 2003 amid a stock analyst scandal, and was replaced by his hand-picked successor, Charles Prince. Weill remained Chairman for three years until his term expired, and the roles were recombined in Prince. At the end of 2007, driven by the subprime crisis and a shareholder movement to split the roles, the board ousted Prince and appointed Vikram Pandit as CEO and Sir Winfried Bischoff as Chairman. The company’s performance and stock value continued to decline with the financial crisis. Pandit resigned in 2012 and was replaced by Michael Corbat. The roles remain split. Bylaws now call for an independent Lead Director if the Chairman does not qualify as independent. The current Chairman, Michael O’Neill, qualifies, so there is no Lead Director.
WellPoint was formed when WellPoint Health Networks merged with Anthem Insurance in 2004. Larry Glasscock, CEO of Anthem, became CEO of the new company, and Leonard Schaeffer, Chairman of WellPoint, became the Chairman. A year later, Schaeffer resigned amid controversy over his $337 million departure package. Glasscock added the Chairman role. In 2007, Glasscock stepped down as CEO but remained Non-Executive Chairman. CFO Brian Colby was the designated successor; however, he was accused unspecified violations of the company's personal conduct policy, not related to financial misconduct, and was forced to resign. A relatively unknown executive, Angela Braly, was elected CEO. When Glasscock retired in 2010, Braly added the Chairman role, and the board appointed a Lead Director. In 2012, under pressure from institutional investors and public criticism of her leadership, Braly resigned both positions. The roles remain split, with Joseph Swedish as CEO and George Schaefer as Chairman. Because Schaefer is independent, there is currently no Lead Director.
At Hewlett-Packard, Carly Fiorina had held both roles for over five years when she was forced out by the board in 2005. Board member Patricia Dunn was named Non-Executive Chairman, and an interim CEO served until the board named Mark Hurd CEO. In 2006 Dunn resigned under board pressure after claims of Federal fraud violations. Although Dunn was exonerated by the courts, on her watch the company hired private investigators to identify the source of board-level leaks to the media using a technique known as pretexting, which is a Federal crime. The Chairman and CEO roles were then recombined in Mark Hurd.
In 2010, Hurd was forced to resign amid sexual harassment claims. Raymond Lane as then named Non-Executive Chairman, and the board made the controversial selection of Leo Apotheker of SAP as CEO. Apotheker’s brief tenure was marked by the ill-conceived acquisition of Autonomy, which led to an $8.8B write-down and accusations of accounting fraud. Meg Whitman, formerly CEO of eBay, was appointed CEO of HP in 2011, and seems to have brought some stability. The board, which had been characterized as dysfunctional by departing executives going back to Fiorina, has been reconstituted. After barely being re-elected in the 2013 proxy vote, Raymond Lane and the other two longest-serving members resigned. Ten of the twelve members joined in 2011 or 2013. Ralph Whitworth currently serves as interim Chairman.
AIG had leadership shakeups both before and during the financial crisis. In 2005, long-time CEO (since 1968) and Chairman Hank Greenberg was forced to resign both positions under allegations of fraudulent business practices by the New York Attorney General (all charges were eventually dropped). The roles were then split, with Martin Sullivan becoming CEO and Robert Willumstad, formerly with Citigroup, became Chairman in 2006. When Sullivan was ousted in 2008 amid the sub-prime mortgage crisis, Willumstad became CEO (he had stated his intention to run a large company), briefly combining the roles. But he was replaced three months later by Edward Liddy, appointed to oversee the company’s government-financed asset sales. When Liddy stepped down in 2009, Robert Benmosche was appointed CEO and the Robert Miller was elected Chairman.
Jeffrey Noddle retired as CEO of SuperValu in 2009 and as Chairman in 2010. Craig Herkert, formerly of Walmart, succeeded him as CEO. The board decided to keep the positions of Chairman and CEO separate, and elected board member Wayne Sales, retired CEO of Canadian Tire, as Non-Executive Chairman. The board planned to reevaluate the structure in two years.
In 2012, however, Herkert was abruptly fired three weeks after the company had put itself (or its properties) up for sale after its stock price had declined to a 30-year low. Sales was then elected CEO and Executive Chairman, only to be ousted as CEO five months later. He then joined Cerberus Capital. Sam Duncan became CEO at the beginning of 2013. Sales returned to the role of Non-Executive Chairman until the sale of five of the company’s supermarket chains to Cerberus Capital. Then the investment company’s CEO, Robert Miller, became Chairman of SuperValu. The company has also gone back-and-forth regarding the role of Lead Director. The company had one as of the end of our analysis period because Miller was not independent; he has since resigned in favor of an independent Chairman, Gerald Storch.
The other seven companies in this group have had multiple structure changes and currently have roles combined. The most common pattern is split-then-recombine, with the recombination driven by executive departures.
For example, when Comcast acquired AT&T’s broadband business in 2002 and formed Comcast Holdings, Brian Roberts of Comcast became the CEO and Michael Armstrong of AT&T became Chairman. Armstrong chose not to stand for re-election as a director in 2004, and Roberts added the Chairman role. Both Comcast and AT&T had roles combined prior to the acquisition, so this has some of the flavor of a transitional split-then-recombination of roles.
The rest of these complex changes occurred against a backdrop of poor business results, and in some cases the financial crisis. Three involved power struggles and two of them ethics investigations.
In 2003, Philip Condit resigned as Chairman and CEO of Boeing in the wake of a procurement scandal. The roles were then split, with Harry Stonecipher, then 67, who had retired from Boeing in 2002, returning as CEO, and Lewis Platt, former Chairman and CEO of Hewlett Packard, becoming Non-Executive Chairman. Stonecipher was forced out after having an affair with a subordinate in 2005, and James McNerney, former head of 3M, was elected to fill both roles. Kenneth Duberstein currently serves as Lead Director.
The leadership structure story at Walt Disney began dramatically but then settled down. In 2004, long-time Chairman and CEO Michael Eisner was stripped of the Chairmanship amid shareholder dissatisfaction and conflict with board members including Roy Disney. Former Senator George Mitchell was named Chairman. When Eisner retired as CEO in 2005, he was succeeded by Robert Iger. At the beginning of 2007, Mitchell was succeeded as Chairman by John Pepper. When Pepper announced his decision to retire as Chairman in 2012, Iger was elected to be Chairman as well. Because governance guidelines call for an independent lead director if the Chairman is not independent, Orin Smith was elected to fill that role.
Michael Dell has been chairman of Dell since its founding in 1984. He was CEO from 1984 until Kevin Rollins assumed the role in 2004. The ascension of Rollins to the CEO position was said to have been a public acknowledgement of the role he was already playing in Dell. Following a business downturn and SEC investigation, Rollins resigned January 2007, and Dell returned as CEO. Although the precise date is not mentioned in proxy materials, Sam Nunn was named Presiding Director in 2003, and the company continued to have a Lead Director. The company was taken private in 2013.
From 2000 to 2005, Alan Lacy served as CEO, chairman, and president of Sears. After the merger with Kmart that year, the roles were split. Edward Lampbert, founder of the hedge fund that was Kmart’s majority owner, became Chairman of Sears Holdings, and Aylwin Lewis became CEO. Amid declining business results, Lewis resigned in 2008 to be succeeded by interim (for three years) CEO Bruce Johnson, and then CEO Louis J. D’Ambrosio. When D’Ambrosio stepped down citing family health issues in early 2013, Lampbert added the CEO title, thus recombining the roles.
Under investor pressure and persistent criticism of his leadership, Philip Purcell abruptly resigned as Chairman and CEO of Morgan Stanley in 2005. His tenure had been marked by a series of legal clashes and internal dissent among key executives. He was succeeded in both roles by John Mack, who had been forced out in a power struggle with Purcell four years earlier. The company helped precipitate the financial crisis of 2008, and Mack announced his retirement as CEO effective the start of 2010. The board decided to split the positions and elected Mack to remain as Chairman and James Gorman to be CEO. Two years later, when Mack retired as Chairman, the board reversed itself and elected Gorman to become Chairman as well. In 2005, the board also established a Lead Director position, and C. Robert Kidder is the current one.
At General Motors. The roles were split from mid-2000, when Rick Wagoner succeeded John Smith as CEO, until 2003, when he replaced Smith as Chairman as well. The roles remained combined under Wagoner until he stepped down from both positions in late March 2009. The company had lost its position as worldwide automotive sales leader, and later in 2009 it would go through a brief and carefully structured bankruptcy that left the U.S. Treasury its largest shareholder.
Wagoner was replaced as CEO by Fritz Henderson, President of the “Old GM,” and as Chairman by Ed Whitacre, retired Chairman and CEO of AT&T. Plagued by disagreements with the board, Henderson’s tenure lasted only eight months, and Whitacre added the CEO role in December 2009. He relinquished the role nine months later to Daniel Akerson, a managing director of The Carlyle Group who had been appointed to the board by the Treasury. That transition was meant to reassure investors that “New GM” had a CEO-for-the-long-term in advance of its November 2010 IPO. When Whitacre retired as planned at the end of the year, Akerson became Chairman as well.
When it combined the roles under Whitacre, the GM board announced that business conditions demanded centralized control, but added: “Our Board will reconsider this determination from time to time based on changes in our circumstances and on the individuals available to lead the Company.” In his memoir, Whitacre describes the board’s indecision regarding Chairman-CEO structure. In a 2013 interview with Reuters, he summed up the outcome: “When Dan put his hand up, that took care of the problem. Not very elegant, I will admit. But that's how it played out.”25
GM announced the appointment of Mary Barra as CEO (and the first woman to lead a major U.S. automobile company) on January 15, 2014. At that point the roles will again be split. The table reflects situations as of 2013 year end.
Table 6: Complex Changes
* Rotating Presiding Director, no designated Lead Director.
Given the frequency of leadership structure changes, these companies have significantly higher CEO turnover: an average of 2.7 CEO changes since 2000 compared with an average of 1.5 among the other 85 companies in the F100. They are also much more likely to appoint outsiders as CEO: 35% of the time compared with only 17% among the other 85 companies. Hewlett-Packard went outside for all three of its CEO appointments.
The four companies currently with split roles and insider Chairmen all have independent Lead Directors, as do six of the seven companies with roles combined.
- If a CEO-and-Chairman overreaches (e.g., in a merger or acquisition), or presides over a severe business downturn, or has chronic conflicts with the board, or is involved in a regulatory investigation or personal scandal that brings into question the quality of corporate governance, the response is to split the roles and sometimes oust the executive from both.
- If the sudden departure of a CEO-and-Chairman leaves a company with inadequate succession arrangements, the response is to split the roles at least for a while and appoint a pair of executives who seem likely to work together well.
- If roles are split and the business situation demands unified and emphatic direction, the response is to combine the roles.
What the Governance Guidelines Say
In their corporate governance guidelines, the seven of the eight companies that are currently split give their boards flexibility to determine leadership structure. However, Hewlett-Packard expresses a preference for splitting: “The Board’s preferred governance structure is to separate the roles of Chairman and CEO.” And AIG affirms its split of roles: “At the current time, the policy of the Board, reflected in the by-laws, is that (1) the role of Chairman should be separate from that of the Chief Executive Officer and (2) the Chairman should be selected from the Independent Directors.” Guidelines at Ford make no mention of Chairman-CEO role structure, but the company affirms its current structures in its annual proxy statements.
Guidelines at Humana and Tyson Foods call for election of a Lead Director regardless of the Chairman-CEO arrangement. AIG’s guidelines assume that an independent Chairman presides over meetings of the independent directors. Ford has a provision for Presiding Director. The other companies make Lead Directors conditional upon the independence of the Chairman.
Of the six companies currently combined that publish governance guidelines (Dell is now a private company), four give the board flexibility in determining leadership structure, without indicating a preference. Interestingly, the Walt Disney guidelines favor splitting of roles, even though they are currently combined: “The Chairman of the Board shall be an independent director unless the Board concludes that the best interests of shareholders would be otherwise better served.”
Comcast’s governance guidelines make no mention of role structure but mandate an independent Lead Director. Morgan Stanley guidelines also call for a Lead Director regardless of the Chairman-CEO arrangement. The guidelines at Boeing, General Motors, and Disney call for a Lead Director whenever the Chairman is not independent. Sears makes provision for a Presiding Director.