It’s proxy time, which means that a bunch of companies are getting ready to hold shareholder votes on one of the dumbest ideas good-governance types never fail to put forth: proposals to split the CEO’s role from the chairman’s.
Please. As I far as I can tell, the main reason the split-the-two-jobs issue keeps appearing is that it’s a way for the governance scolds to keep feeling morally superior to the rest of us. Beyond that, I’m at a loss. If there’s any empirical evidence that companies run by a separate CEO and chairman produce better governance (or higher returns) than companies run by a single individual, I have yet to see it. And my own anecdotal experience hints that just the opposite is true. This, year for example, shareholders of two banks I know well, CoBiz Financial and U.S. Bancorp., are being asked to consider separating the two roles. Not to put too fine a point on it, but any shareholder at either company who votes yes on the matter needs to have his head examined. CoBiz and U.S. Bancorp are two of the best-managed banks in the business, and are run by individuals of exceptional ability and integrity. There is absolutely no reason (other than, say, useless moral preening) to strip either man of the chairman’s title.
As far as that goes, if shareholders of a given company do strip its CEO of the chairman’s title, they might want to wonder why that CEO has the job in the first place. If he’s not to be trusted to do his job competently without outside adult supervision, one might wonder if he can be trusted to do his job competently at all.
I’ve followed and invested in public companies for over 30 years and concluded long ago that the governance question doesn’t lend itself to blanket formulas or checklists. Rather, in my experience, at any given company you know good governance when you see it. I have no problem with a board opting to have a separate chairman and CEO. Some truly great companies have gone that route. Others, obviously, combine the rjobs. Either choice is fine. Just don’t believe that decisionmaking-by-rote can automatically improve how a company is managed and governed. It can’t.
What do you think? Let me know!