Recent years have seen a push towards the separation of the roles of CEO and chairperson of the board. While many companies still maintain a combined CEO-Chair role, investors consistently express their concern that the dual CEO-Chair position jeopardizes the independence and effectiveness of the board. Yet, while investors and academic research have focused on one channel of achieving such separation - through the appointment of an independent director as chair - a second channel has been left relatively unexplored. In fact, in many cases, as this Article documents, the separation of CEO-Chair has occurred through a different channel: the current CEO-Chair steps down as CEO while remaining as the chair of the board, and a new CEO is appointed. This is what the Article terms as the "successor CEO" phenomenon. Acknowledging the significant number of companies with such a structure in corporate America raises several policy questions. What are the corporate governance and operational benefits and drawbacks that the successor CEO route presents? How should investors treat companies that have separated the CEO-Chair roles, but have done so through the successor CEO route? This Article explores these questions, providing detailed data regarding these companies and the chairs of their boards. The Article finds that companies with a successor CEO structure often avoid the appointment of a lead independent director, and in some cases even declare their ex-CEO chair as independent. In addition, their ex-CEO chairs are longer tenured and older compared to other chairs and they often appoint their successors from within. Recognizing that companies with a successor CEO structure may pose specific governance concerns based on the key findings regarding successor CEO structures, the Article then offers several policy recommendations.
Keywords
Board of Directors, Corporate Law, Corporate Governance, Lead Independent Director, CEO-Chair Separation, Independent Chair
