Chairman and CEO: separate or combined?

The question of whether the roles of chairman and chief executive officer should be separated is another issue that deserves attention.

According to proponents of the split roles, an independent board chairman can better protect shareholder interests by leading the board while the CEO runs the business, eliminating many conflicts of interest.

But others disagree, saying that the split roles are not the best choice for many companies. In their view, one boss is better because it avoids power struggles.

More large companies are separating the roles, and most of the new legislation and corporate governance codes endorse separation, but it’s far from universally accepted practice.

The chairman/CEO combined role at Mexico’s Grupo Televisa S.A. was the target of criticism by GMI, which frequently spotlights company practices that violate good governance principles, often before journalists notice and report on irregularities. Among GMI’s criticisms of Groupo Televisa:

  • Televisa’s chairman and CEO, Azcarraga Jean, who inherited the company from his father, did not appoint an independent chairman

  • Only five members of the 20-member board appeared to be fully independent; several of them served on the boards of companies that do business with Televisa

  • None of the non-executive members had significant executive experience in television

  • The board’s independence was “significantly af¬fected” by the business relationships between individual directors and between directors and Televisa

GMI also criticized Televisa’s lack of independent board committees and failure to appoint separate audit, compensation and corporate governance committees. The chairman of Televisa’s audit and corporate practice com-mittee was an 80-year-old director who had transactions with the company, and the chairman and two other board members were affiliated with Cablevision, which is owned by Televisa, GMI pointed out.

Among the questions that journalists might ask about the boards of companies they cover:

  • How long have directors served on the board? What is the length of a term for a director?

  • How many boards do directors serve on? What are their other interests in the company?

  • Do any of them serve together on other boards? What kind of compensation do they receive?

  • How many shares do directors have in the company?

  • Have any directors sold shares recently? Is there a pattern?

  • What is each director’s attendance record?