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Published: April 12, 2013

 
 

The Right Time to Separate the CEO and Chairman Roles

Despite the pressure from policymakers and advocacy groups to split the roles, and the temptation to follow the lead of competitors that have done just that, companies should proceed slowly. A careful review of current performance is required before even contemplating such a shift, the authors caution.

“Boards that do this under the wrong conditions can send their company off a cliff,” they conclude in the press release, “so our caution to them, in the simplest terms, is ‘if it ain’t broke, don’t fix it.’” 

Bottom Line:
In recent years, the number of companies that have divided their CEO and chairman roles has risen sharply, in part because of recommendations from analysts and legislators. But it’s not the right move for all companies. Indeed, the separation typically pays off only when a company’s performance is subpar, and even then only when the CEO stays on and works alongside a newly appointed chairman. 

 
 
 
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