Following the corporate scandals in the early part of this decade, there were calls to fundamentally change the way U.S. boards are structured – with some arguing that, drawing from the European model, boards should be led by an independent chairman, instead of a combined chairman-CEO. Rather than implement this profound change, stock exchanges adopted a “compromise” requirement – that listed companies must have a “presiding” director.
In the past several years, as expectations and scrutiny of boards of directors have increased, a consensus has emerged about the value of having well-defined leadership of the independent directors on the board. How best to achieve this goal of independent leadership continues to be a matter of discussion and debate, however, and boards are taking different approaches.
Foley's sixth annual National Director's Institute focused on a variety of issues on the forefront of corporate governance, including the emergence of the "lead independent director" or "non-executive chairman of the board" and the important role this individual often plays as an intermediary between the CEO and the board of directors.
Following the corporate scandals of the early 2000s, many governance observers and commentators in the United States began to discuss whether, in order to avert such crises in the future, boards should separate the roles of chairman and chief executive officer, a practice common to governance models in the United Kingdom, much of the rest of Europe, as well as Canada and Australia.
While some in the US embrace the notion of separating the roles of chairman and CEO, others reject the division of power. To delve further into both sides of the issue, we asked two boardroom experts to share their individual and distinctive points of view.
You’ll need diplomacy, judgment, and the ability to work as a team player. There’ll be plenty of awkward moments and gut-wrenching decisions, but the payoff can be well worth it.
“Lead directors and non-executive chairmen interfere with good governance.” So says Frank V. Cahouet, 73, the retired chairman and CEO of Mellon Financial Corp.
The presence of an independent lead or presiding director is often suggested as an alternative to the requirement that an independent director serve as chairman of the board. Are companies embracing this other answer to the oversight question?
Shearman & Sterling's fifth annual survey of selected corporate governance practices of the Top 100 Companies* highlights some of the trends and best practices that have emerged and evolved in the marketplace. The survey continues to track the Top 100 Companies’ and their board’s responses to the revised NYSE listing standards, regulations promulgated by the SEC pursuant to the Sarbanes-Oxley Act of 2002, as well as proposals submitted by shareholders and their representatives.
