Question

. A chairman and a CEO should be hold by different persons. This is one of basic rule in CGC. However, many companies skip this requirement. So the role of a chairman to oversee CEO will be lost. Why do many company still adopt this structure (Chairman and CEO are merged)? And how can the BOD be oversight?

Answer 1

Most of the companies do not hold same person as Chairman and CEO, however there are few which do so. These companies are generally the ones who are either at a large scale or have grown rapidly over the years. These companies still retain their initial founders in the role of Chairman and CEO.

In some companies, it is quite difficult to seperate the two. Consider Jamie Dimon’s continued status as chairman and CEO of JPMorgan Chase.

The company’s shareholders have twice made a case for why Dimon should be stripped of his chairmanship. Dimon, who has served in a dual capacity since 2006, has successfully resisted their efforts — once in 2012 and once the following year. Both votes failed.

Shareholders ultimately chose the security of the status quo, worrying that Dimon would resign if his role as chairman were taken away and left the company without a particularly proven executive leader.

The choice to maintain or even recombine the chairman and CEO roles tends to have roots in the economic environment. During the 2008 recession, for example, the proportion of S&P companies with combined positions temporarily plateaued at around 60% rather than continuing its downward trend. Boards likely feared that separating the two roles could cause change that would be particularly distracting during an economic downturn.

And how can the BOD be oversight? >> Board of directors is kept as an oversight in order to protect the interest of company's shareholders. They maintain a check on corporate activities to ensure that everything is done properly and fairly.