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Should Bank of America’s CEO also be the chairman?

Scott Tong Sep 22, 2015
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Should Bank of America’s CEO also be the chairman?

Scott Tong Sep 22, 2015
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A big corporate governance vote takes place Tuesday morning. Bank of America shareholders will vote on whether one man – Brian Moynihan – should have both the job of CEO and chairman.  

Several big shareholders are seething that Bank of America last year gave CEO Moynihan the chairman job without consulting them. Critics of combining the jobs say the CEO should run the company, and the chair should oversee the CEO. 

CLSA bank analyst Mike Mayo likened the situation to a football team where one man is both coach and general manager.

“If you’ve had a team that’s lost a lot of games,” Mayo says, “then you say ‘Okay the coach should focus on what’s happening on the field, and the general manager ensuring there’s proper oversight.’”

That may make sense in theory, but many say the empirical studies are inconclusive as far company results. In the banking world, JP Morgan and Goldman Sachs combine the two jobs, whereas Citi splits them.

One potential drawback of separating the two jobs: power struggles at the top.

“A number of European companies have done this,” says Bill George of the Harvard Business School, previously CEO and chairman of Medtronic. “The board of the pharmaceutical company Sanofi split it, and it led to a real rift and conflict.”

Both George and Mayo say this question depends on the company and how it’s doing. But the nation’s top two pension funds – representing retired teachers and retired public-sector workers in California – are B of A shareholders and plan to vote against Moynihan holding both roles.

Shareholder calls for separating the job descriptions are relatively recent, University of Delaware finance professor Charles Elson says. He sees it as part of a decade-long move toward increased accountability for corporate executives and directors.

“To really adequately judge how effective the whole thing is, it’s going to take a number of years,” Elson says. “From my experience as a director, and as governance academic, there is great value in the split.”

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