The dual CEO-chairman role is losing favor on public boards

A businessman sits in a conference room
The push for board independence means companies are increasingly separating the chairman and CEO roles.

Active CEOs are less likely than ever to be the top pick for board chair.

A growing share of companies are tapping independent directors to hold the chairman seat, according to a new survey from The Conference Board using data from ESGAUGE, and shared exclusively with Fortune. The percentage of S&P 500 companies that combine the board chair and CEO roles dropped from 49% in 2018 to 44% in 2022, while the percentage of companies with an independent board chair increased from 30% to 37% in that same time frame, according to the report.

Conventional wisdom says the more directors who are not affiliated with the company, the better because it decreases potential conflicts of interest and better positions boards to maintain objectivity when making executive decisions. These days, companies are even more inclined to separate CEO and board chair duties because of directors’ increased workloads.

“It takes a lot of time to manage the board and lead the board, and if you’re doing that at the same time that you’re trying to lead the business through crises or transformations, that’s hard,” says Paul Washington, executive director of The Conference Board’s ESG center. “It can really help to have two people doing it…and you get extra points with investors.”

While governance watchdogs and a plurality of investors prefer to have a board chair who is not the CEO, the practice is not yet widespread for a number of reasons. Many tech companies—like Facebook or Amazon—have founder-CEOs who want to have a say in all board decisions. Other companies state that it’s their preference to have them combined, according to the report.

“There are a lot of synergies by having one person do both roles,” Washington says. One of them being that “the person who is overseeing the board agenda is the person who knows the business best: the CEO.” 

Some say splitting the CEO and board chair can create confusion, internally and externally, as to who’s in charge, Washington adds. This can be especially true if there is a three-headed leadership consisting of the CEO, a non-independent board chair, and an independent director. (In most of these cases, the non-independent board chair is typically a founder or former longtime CEO, or the company is transitioning CEOs.)

CEOs serve as board chairs at 55% of companies with an annual revenue of $50 billion or more, but at just 25% of companies with annual revenue under $100 million. And according to the survey, larger companies’ top reason for combining the two roles is that they can still achieve board independence by tapping an additional independent director.

Ultimately, deciding who holds the board chair seat boils down to two things, Washington says. “The clear allocation of responsibilities between the CEO and the chair, and the chemistry between the two.”

Aman Kidwai

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View from the C-suite

Bahram Akradi, CEO of Life Time.
Courtesy of Life Time

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