Merger of CEO-Chair Roles Increasing in Large Companies

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By Che Odom

March 30 — More of the largest U.S. companies are combining their chief executive officer and board chairman roles, though they continue to receive shareholder resolutions calling for independent board leadership.

Professional services firm Mercer LLC, in a study released March 30, found that the number of S&P 100 companies with a combined CEO and chairman grew to 78 percent in 2015, up from 70 percent in 2012.

“With so much knowledge and expertise among board members, an executive chairman can keep the dialogue between the board and management open and efficient, providing clarity to the CEO on strategic and tactical issues,” Peter Oppermann, partner with Mercer who specializes in executive compensation, told Bloomberg BNA in a March 30 e-mail.

Mercer’s analysis, which is based on data from 67 S&P 100 companies and 186 others from the S&P 500, showed that the percentage remained unchanged at 48 percent for those outside the top 100 corporations.

Many large investors do not favor combining the chairman and CEO roles. For example, the Council of Institutional Investors said the positions should be merged only in “very limited circumstances” to prevent a CEO from exerting a “dominant influence” over the board.

Some companies, under pressure to split the roles, are appointing lead independent directors.

Just this month, the board of Viacom Inc. elected long-time member Frederic Salerno to be lead independent director, a new role at the entertainment company that owns Nickelodeon and MTV. The move came after the board faced internal dissent and pressure from proxy advisers to implement corporate governance improvements.

Shareholder Proposals

Darla Stuckey, president and CEO of the Society of Corporate Secretaries & Governance Professionals, told Bloomberg BNA March 28 that companies should continue to expect activist investors to press for independent board leadership as part of a new era of heightening focus on corporate governance.

Proxy proposals are one way shareholders attempt to pressure boards.

Earlier this year, shareholders at two large companies, Tyson Foods Inc. and Monsanto Co., rejected resolutions calling for an independent board chairman, with neither resolution receiving more than 16 percent approval, according to a review of securities filings.

Several more companies face votes on similar shareholder proposals in the next month. They include Bank of New York Mellon Corp., U.S. Bancorp, Honeywell International Inc., IBM Corp., Wells Fargo & Co., Johnson & Johnson, General Electric Co. and AT&T Inc. Those resolutions were filed by activist proponents John Chevedden, Kenneth Steiner and Gerald Armstrong, who also have pushed these and many other companies on a number of governance issues.

To contact the reporter on this story: Che Odom in Washington at codom@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com