Splitting CEO & Chair

Research in Motion (a.k.a. “RIM”, maker of the Blackberry) has been under pressure to split the role of CEO and Chair. RIM has been facing serious scrutiny of late, and questions have arisen in particular about whether the company needs new leadership. Splitting the role of CEO and Chair would be an awfully good start.

See this Globe & Mail story, by Janet McFarland: Shareholder calls for splitting CEO, chair roles at RIM.

A small investor in Research In Motion Ltd. …is anticipating big support for a shareholder resolution calling on the BlackBerry maker to split the jobs of CEO and chairman.

Mutual fund company Northwest & Ethical Investments LP has argued RIM co-CEOs Jim Balsillie and Mike Lazaridis should not also be co-chairs of the company’s board, arguing a “high performance” board needs independent oversight of management.

The story quotes Bob Walker, vice-president of Ethical Funds at Northwest & Ethical, as saying that keeping the two roles “has become standard practice, not just best practice.” More to the point, perhaps, is that it has become widely-recognized not just as standard, but as best. The board’s job is to oversee the CEO, and it’s hard to do that effectively if the CEO runs the board. (This was precisely the point of Friday’s blog entry on conflict of interest among mayors and chairs.)

You may well hear people point out that there’s no evidence that splitting the roles of CEO and Chair is beneficial, in the sense of increasing long-term shareholder value (or in terms of any other outcomes, for that matter). Fair enough. But to say that there’s no evidence is not to say that there’s no reason. Shareholders have a right to good governance, and that right doesn’t depend on concerete outcomes, any more than a client’s right to zealous legal representation does.

There’s another reason to favour splitting the chair & CEO. Even if such a split isn’t directly correlated with increasing shareholder value, it may well be correlated with other things that matter. My colleague Matt Fullbrook, of the Clarkson Centre for Board Effectiveness, puts it this way:

Since the early 2000s, splitting the Chair/CEO roles has become the norm in Canada, and with good reason: more than any other individual governance best practice, Chair/CEO split with an independent chair is highly correlated with adoption of other good governance practices and disclosure. That there is still push-back on splitting the roles is baffling.

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