Catégorie : Droits des actionnaires

Henry D. Wolfe  – I support the split of the Chairman and CEO roles but where is the focus and emphasis on 1)The importance of the chairman’s role in setting the tone and expectations for the performance of the company and 2) The qualifications that are needed in a non-executive chairman? « Independendence is not enough,,,purpose and competence needs to be included in the mix.

James McRitchie  – I don’t think there is much doubt that, in general, it is better that the roles be split. http://www.commpro.biz/ir-therefore-i-am/governance-and-compliance/splitting-the-chairman-ceo-titles-practice-good-corporate-governance-while-saving-money/#.UQwWlqU7Mmk

Carl Hagberg – I feel strongly that having a totally independent Lead Director – one with a clear and robust Charter – is far superior to the idea of having a totally independent Chairman. For starters; « No man can serve two masters » – and that is often what one ends up getting with such deals. Secondly; in difficult times – and certainly when there is a business crisis – it is usually a major strategic blunder to divide one’s forces among two « leaders. » My biggest fear – and we have seen this play out recently at several large companies – is to end up with a trigger-happy « Imperial Chairman » – who turns out to be at least as bad – and often worse – than the old-time Imperial CEO. So called « Independent Unlike a « Lead Director », who must have, and continue to maintain the support of the Board as a whole – so called « Independent Chairmen » often seem to think they are free to have a « Charter » of their own making – that is often subject to change at their own whim. Yes; sometimes an Independent Chairman can be a good thing…But at other times, the need for a single strong leader – who can speak and act with one voice is an overriding concern. (And just as an aside; of late, we see CEOs getting ousted far more often in such situations than we see the « Independent Chair » being shown the door…which may, or may not be the best thing in the end.) A strong Lead Director – with a strong Charter – and with strong Board support – is a far better and safer way to go in my book.

Richard Leblanc  – Carl you raise good points. The quality and leadership of the person, and relationships and context, are important. Both models can work and both cannot, depending. Most Anglo American companies other than the US choose the separate chair, where the US prefers the Lead Director. Both models can work. The disadvantage I see is the LD does not chair meetings. But then again I have seen separate chairs not effective at chairing meetings. I saw one where the Chair did not say a single word all meeting… And there is no causal relationship academics have found between separate chairs and shareholder performance, chiefly because independence is being measured not effectiveness.

Henry D. Wolfe  – I would suggest that the lack of the causal relationship is due to the complete lack of understanding of what is required in a high peformance non-executive chairman. The focus is too tilted toward independence alone rather than delving into the understanding of what is required of the leader who should be setting the standards for the group (board) that is in place to ensure the maximization of company performance.

Michael Wildenauer  – I’m sure that not many in the US would agree that the separation of powers in the system of government be abolished; splitting the chair/CEO roles serves the same purpose (albeit not quite so large in scope, importance etc.). Sure having the « single strong leader – who can speak and act with one voice  » can be useful in times of trouble, but it seems likely to get companies into trouble just as often. Its about checks and balances. As with government, its an imperfect system, but possibly less imperfect than others… Just my opinion, obviously.

Richard Leblanc  – Henry, I think if you asked many academics what they would need to actually measure what you write above, they wouldn’t have the foggiest. Indeed the case for execution of this heightened role beyond independence may also be true for some boards or chairs. I think the role and importance of the chair is the most misunderstood, opaque, understudied yet vitally important board positions.

Michael Wildenauer  – Richard, to counter your first point may initial analogy of the US not vesting all power in the President, but also in Congress and the judicial system, seems appropriate. The Chair has one very important source of power, the power to explicitly or implicitly set the agenda. If that Chair is also the CEO, the ability of the board to even consider the wisdom of certain strategies, let alone how they are being executed for example may be curtailed. Or not, depending on the character/abilities/integrity of the individual who holds the position.
I’m sure that Lead Directors work fine in most situations, but its not a very lean solution to add something new rather than fix something that’s already there. It seems to me that the LD argument seems to be wanting to have it both ways: we need a strong unified CEO/Chair voice & the LD will ensure that one voice won’t speak over the top of others. As usual, just my opinion.

Richard Leblanc  – You know Michael after I wrote my response I thought of yours, and the very good point you are making is that there are strong balance (one could argue too stong) of powers in the US political context (legislative, executive, judicial), but not as much in the corporate sector (a company can still have a chair, ceo and president AND controlling shareholder). And I agree with your second paragraph. It is not just agenda setting but the meting itself and who says what, when. A CEO and chair combined is proposing and assessing. The LD role has been criticized for not having the authority of the office. A good chair can speak over the head of the CEO but I don’t know that a LD has the same klout. I am not sure the US will ever truly adopt a NEC model, but there is constant movement in this direction I find.

Jason Masters  – In corporate Australia we have a preference (strong) for the separation of the Chair and the CEO, with the Chair obviously having a key role in the Board room, and with the REM committee the performance of the CEO. The Chairs also provide a mentoring, support role for the CEO which can be incredibly useful for CEO’s. There have been some recent examples where this has not been followed, and generally the market has been supportive usually given the particular enterprise and the particular CEO.

Henry D. Wolfe  – Re your point above re academics, I think the same goes for the governance community in general. I would suggest that this is due to a continuation of viewing governance through the lens of compliance, oversight and related frameworks rather than seeing the board as the entity with the primary responsibility to ensure that the company’s performance is maxmizied. When viewed through the latter lens, a entire series of different questions arise in regard to what is needed in a non-executive chairman.

Richard Leblanc  – Jason it is similar for Canada – there is a strong emphasis on independent chairs, of all public companies, but there in it stops. I recommended a position description to our regulator and they went with it, but in retrospect that was a mistake. The management lawyers draft the chair role to be NOT what Henry describes above, but to keep the board and chair at bay. You get what you regulate. If you want an independent chair and are silent on mindset, strategic role, performance and value creation, then you get an independent chair, only. I am not suggesting regulation, but I am suggesting more guidance in terms of the qualities and attributes required of the chair, and directors, and their responsibilities beyond compliance. My interviews I am undergoing are very revealing. It frustrates activists what is happening and how chairs and directors are chosen, and that indeed many are not independent as believed or intended. Shareholders clearly understand what is needed, and have the experience and track record. I interviewed someone Friday who has been involved in 50 activist situations.

Steven Wood  – Great discussion. I am a clear advocate of separation of powers of Chair from the CEO. I remember the advantages of Procter & Gamble separating these more than 50 years ago. It was principally based on separate of powers argument. Over time more of the strategy review and general performance of the company has come under the perview of the independent Chairman. Agree that this situation is an exception in US corporations, but one that can be found in more than P&G. In China there is usually no spliting of Chairman and CEO role, which I think causes many of the governance issues that are coming out frequently in the press globally about Chinese companies under investigation for false representation of their business. Of course, you could say that corruption is endemic in China and this is just another reflection of this. I think that an independent Chairman could help in bringing better governance. HK is considering such a measure. On the other hand in Israel, the Chairman and CEO are usually split. It is traditional with little law in this area. It is clear that an independent Chair would be better at representing the interest of the owners/shareholders. The Chairs in Israel usually come from the industry (retired) or in advisory capacity in the industry, so know it well. Their is a bias to focus on company performance.

Brenda Kelleher-Flight  – Which model works depends on the ability of the chair to i) facilitate meetings without imposing his/her views, ii) accept differences of opinion and weigh the benefits associated with each perspective, iii) ensure the board is a team (rather than just a group), iv) ensure all data is on the table and refrain from assuming that the information provided by the CEO is all inclusive, v) view the work of the board from a longitudinal perspective (rather than a one-meeting at a time), vi) maintain focus on the mandate of the entity, vii) ensure the effectiveness of the board is evaluated, and viii) ensure that the board does not see its role as being synonymoous with pleasing the CEO or backing away when the CEO uses any strong-armed tactics.

Al Errington  – My opinion is that a chair being a CEO is a conflict of interest. The fundamental responsibility of a board of directors is to hire, set objectives and direction, and evaluate performance of the CEO. The chair’s fundamental responsibility is facilitate and focus the board in doings it’s work of hiring, setting objectives and direction, and evaluating performance of the CEO. If the chair is also the CEO they are focusing and facilitating the setting of their own objectives and performance evaluations. Even if performance is good, accountability is very weak which may have long-term issues.

Carl Hagberg – This is excellent, Brenda – and a close-to-perfect statement, in my opinion, of the kind of Charter there should be for the Lead Director…and yes, I guess for an « Independent Chair » as well. I think that EVERYONE agrees that there needs to be a strong system of « checkpoints » on the CEO – and a very strong process for making sure the CEO stays on task, uses the Board as it SHOULD be used, serves the needs of all shareholders and, above all, does not revert to the old « Imperial » Chair/CEO model…My big fear. as I noted earlier, is that many so-called « Independent Chairmen » unilaterally grant themselves too MUCH independence and, unless there is a strong Charter that is designed, managed and closely supervised by the Board as a whole, there is a very real and present danger of creating an « Imperial Chairman. » To me, the Lead Director, who is primarily a « creature of the Board » – and who, almost invariably is the choice of the Board rather than a nominee of the Chairman – and who operates under a strong but frequently reviewed Charter – is the way to go…

Brenda Kelleher-Flight  – Unfortunately, human nature intervenes. Often those in power (or think they should have the power) chose others who will agree with them and support their position. I agree that one way is to ensure the charter is supervised by the board. The question I often grapple with is how to get boards to see diversified opinions as positive rather than time wasters, especially when they have a blocked agenda and strict time limits.

James McRitchie  – The move for years has been to have « independent » board members on the board and chairing important committees. That whole effort means little if the chair is not independent of the CEO. Lead directors are a poor substitute for the real thing.

Carl Hagberg  – What in the world would make someone think that a « Lead Director » would not be an « Independent Director » who is « independent of the CEO »…much less a « poor substitute for the real thing »??? This, of course, is the whole point of having an official – and publicy available Charter – regardless of whether one calls the person who « leads the meeting » and sets the agenda an « Independent Chairman » or a « Lead Director. »

Richard Leblanc  – My understanding (and observation) is that a Lead Director does not set the agenda nor lead the meeting, like a Chair does, but rather is consulted on the agenda and chairs the executive session when the Chair exits the meeting. In other words, Carl, what I hear from some folk in this stream is that, notwithstanding the Charter for a Lead Director, the issue is still that the Non Executive Chair still sets the agenda and runs the meeting, whereas the Lead Director does not. The NEC and LD roles are not synonymous. I hear (and agree with) that all else equal, the NEC is superior to the LD role. Of course it goes without saying that an effective LD is preferable to a non-effective NEC, but what Jim, Brenda and Henry and others above are saying (I think) is that the best [superior to a LD] is an « effective » NEC, accomplishing the role and responsibilities they set out above.

Lee Mathias  – Here in the Antipodes, NZ, the roles are split. The Chair’s role is to set the tone and guide the decisions on the strategic direction of the firm. That goes for Board meetings too i.e. to set/establish the context of the decision and, through canvassing the opinions of all directors, reach a decision. It is beneficial for the CEO to hear the Board reaching a decision. The CEO puts those decisions in action.

James McRitchie  – I really think there is something in a name. Getting named a « lead director » will never be seen in the eyes of many the same as taking on the title of « board chair. » Why all the workarounds to make it appear that lead directors are equivalent. Is a civil union equivalent to marriage? I don’t think so. If lead directors are equivalent in every way, why the hesitation to call them board chairs?

Al Errington  – Chairs who are CEOs, or dependent on CEOs, are bad governance. Lead directors are an attempt to have your cake and eat it too, a workaround bad governance but still retains bad governance. The board of directors is supposed to be the CEO’s boss. If the roles and relationship is not separated and defined, the relationship is murky along with accountability. Many organizations either don’t want change or are afraid of the unknown. Good governance, I am sorry to say is largely unknown, in our culture and economy.