Description
About half of the companies that make up the S&P 500 Index, an index comprised of 500 publicly traded United States companies with market capitalizations of at least $6.1 billion, have one individual as the CEO & Chairman rather than splitting each role amongst two individuals. This sparks a conflict of interest within corporate governance in U.S. companies. In a combined role of CEO and Chairman of the Board, a company has no issue determining who is in charge of the goals and outcomes of the organization. This leadership structure has potential for setting clear company objectives and maintaining efficiency coming from one voice; however, it leaves many loopholes to be taken advantage of if the individual were to act in his or her own best interest. This paper serves to provide further research and explanation into what would be the overall best resolution, both ethically and strategically for U.S. companies, comparing the pros and cons of the two leadership structures and ultimately concluding that a combined CEO/Chairman of the Board structure should not remain an acceptable corporate governance practice in the United States. The ethical risks outweigh the potential success of combined leadership, often resulting in scandal, fraud, and failure. For each decision to be in the best interest of the shareholders, the decision power should be split into two different hands—one CEO and one Chairman of the Board.
CEO and Chairman of the Board: The Corporate Governance Controversy
About half of the companies that make up the S&P 500 Index, an index comprised of 500 publicly traded United States companies with market capitalizations of at least $6.1 billion, have one individual as the CEO & Chairman rather than splitting each role amongst two individuals. This sparks a conflict of interest within corporate governance in U.S. companies. In a combined role of CEO and Chairman of the Board, a company has no issue determining who is in charge of the goals and outcomes of the organization. This leadership structure has potential for setting clear company objectives and maintaining efficiency coming from one voice; however, it leaves many loopholes to be taken advantage of if the individual were to act in his or her own best interest. This paper serves to provide further research and explanation into what would be the overall best resolution, both ethically and strategically for U.S. companies, comparing the pros and cons of the two leadership structures and ultimately concluding that a combined CEO/Chairman of the Board structure should not remain an acceptable corporate governance practice in the United States. The ethical risks outweigh the potential success of combined leadership, often resulting in scandal, fraud, and failure. For each decision to be in the best interest of the shareholders, the decision power should be split into two different hands—one CEO and one Chairman of the Board.