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Companies face calls for separate CEO and board chair

Annie Baxter Jun 9, 2015
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At General Motors’ annual meeting, investors will likely learn the fate of a shareholder proposal to split the roles of chief executive and board chair “whenever possible.”

In other words, as a policy, the chief executive and the board chair would be two different people. That’s not how it works at most American companies, but, a dual role is “kind of like having a student grade his or her own exam. Just not a good idea,” says Charles Elson, a corporate governance expert at the University of Delaware.

Elson supports the move to make board chairs independent. He says it reduces conflicts of interest between the chief executive and board chair when it comes to matters like pay or performance.

GM’s board chair is currently independent. Under the shareholder proposal, the firm would commit to an independent chair in its bylaws.

“This is what has become a fairly common proposal,” says Carol Bowie. She’s head of the Americas Research Group at Institutional Shareholder Services, or ISS, which advises big investors on how to vote on such matters.

Bowie says ISS is tracking 64 independent board chair proposals in corporate America right now and support for them appears to be ticking up.

But Michael Useem, a management expert at the University of Pennsylvania’s Wharton School, says these moves don’t improve companies’ performance.

“Don’t get your hopes up that it’s going to make a difference,” he says. “Because statistically speaking, research has repeatedly confirmed that it won’t.”

GM’s board has recommended a vote against the proposal that would give shareholders discretion over who gets what job.

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