Spring Meeting: Corporate Governance Round Table - Parts Three & Four: Independent Compensation Consultants & Directors and Splitting the Roles of Chairman & CEO
The panel consolidated their last two discussions as the time drew to a close. First, was a brief conversation regarding Independent Compensation Consultants and Independent Directors. Although this topic does not have the same momentum as other Dodd-Frank provisions, there were still a number of opinions in the room. The conversation centered on the inability to adequately define “independent” across different standards such as NYSE Rules, NASD Rules, and now under Dodd-Frank. Many commentators stated that expectations of who remains independent under all the rules are on their way to an absurd and impractical extreme. This discussion concluded with the understanding that it is extremely difficult to get a corporation to voluntarily initiate this type of change.
The panel concluded with a discussion of splitting the Chairman and CEO positions. This conversation was quite common throughout the Conference. The discussion began with this question: What creates an effective CEO/Chairman relationship? The group came to a consensus that corporations must avoid dueling executives and roles must be clearly defined and implemented This led top a conclusion in favor of the splitting the roles based on the idea that the title should mean something.
One panelist broke this argument down as follows. Since the CEO works for the Board of Directors, and the Chairman is the head of the Board, how can the CEO logically run the group for whom he or she works? This leads to an inherent conflict, as the individual being monitored is in charge of the group doing the monitoring. Although seemingly difficult to argue with, this point was met with conflicting commentary. The concerns mainly focus on the confusion within the company, and within management brought by splitting the roles.
Although the two sides on this issue share some common ground, both seem to have a firm grasp of their own positions which will make this issue an interesting one to follow going in the future.
Thank you again to everyone who followed our coverage of the 2011 ABA Business Law Section’s Spring Meeting from Boston, MA.