June 11, 2012
Under pressure from activist investors, a growing number of companies are splitting the roles of chief executive and chairman, The Wall Street Journal reports. The trend sees many CEOs losing control of corporate boards, which are charged with overseeing their performance and decisions. Among companies in the Standard & Poor’s 500-stock index, more than 20 percent have appointed an independent outsider as chairman, up from 12 percent in 2007, according to statistics the Journal cites from the executive-search firm Spencer Stuart.
A CEO who is also chairman runs the board and influences its agenda, so a chairman without ties to the company’s management allows board members to act as a more effective counterweight — a welcome change for investors after a decade in which weak board oversight has been blamed for contributing to accounting scandals and bank meltdowns. Thanks to shareholder resolutions, further shifts in boardroom power seem likely.
As the Journal reports, the latest move toward independent chairmen came on April 19, when Moody’s Corp. stripped its chief executive Raymond McDaniel Jr. of his chairman’s responsibilities. Critics charged that the company’s board had not adequately restrained management before the financial crisis, when Moody’s gave high ratings to debt that soon went sour. — Greg Beaubien