Separation of
role of chairman and CEO, is necessary due to :
The board of directors have the task of managing all the
business operations and protecting the interests of the
shareholders. The chairman heads the board of directors .
Separation of the chairman and the CEO, who is the top manager of
the company ensures smooth functioning of the
organisation.
- The board of directors decides the compensation of the CEO. A
CEO also the chairman could lead to a conflict in matters of
executive compensation,recruitment of new staff. The board oversees
the performance of the CEO and hires and fires them after their
performance evaluation. Making the CEO and chairman one person
makes it difficult to perform such functions. It could lead to
conflict of interest , as the CEO may vote for his own
compensation.
- Splitting the role of chairman and the CEO is important as
combining both the roles lead to lack of oversight and reduces the
independence that the board enjoys. Appointment of a separate CEO
helps to signal the board that a unified leader is answerable to
the board, while the board can concentrate completely on execution
of business strategies
- Both the roles are very intensive roles and so a separation of
both these roles is a must. A CEO also the chairman can lead to a
abuse of the position. A company which is run by an independent
board makes sure that the business is run as per the mandates and
nay deviation is immediately rectified.
- The separation helps the CEO to concentrate completely and
focus on the operations of the business.