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Explain FIVE (5) reasons why it is usually desirable for the chairman of the board of...

Explain FIVE (5) reasons why it is usually desirable for the chairman of the board of directors and the chief executive officer to be different individuals.

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Answer #1
  • All public companies have a board of directors headed by a chairman, who influences the board; they also have a chief executive officer, who is the top manager in the company.
  • In some companies, the chairman also serves as the chief executive officer; while this can streamline some operations, there are also arguments against one person holding this dual role.
  • Executive pay is decided by a corporate board, meaning a CEO who is also chairman votes on their own compensation—a clear conflict of interest.
  • Boards monitor corporate governance, or how the CEO runs the company relative to its mandate and shareholder wishes—making it difficult for a chairman/CEO to monitor herself.
  • Boards must have a management-free audit committee report to them on corporate oversight, creating a conflict of interest if the company's top manager, the CEO, is also the chairman of the board
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