Directors Favor CEO-Chairman Role Split
Tue May 28, 6:29 PM ET
NEW YORK (Reuters) - Two-thirds of directors favor splitting the roles of chairman and chief executive officer as a way to reform the way U.S. corporations operate and prevent business collapses like Enron's, a survey said on Tuesday.
And more than 70 percent of directors surveyed said they would like to see companies appoint a lead director, who is independent of management.
The responses from 180 U.S. directors, who sit on the boards of more than 500 U.S. companies, were part of a survey carried out by management consultants McKinsey & Co. on corporate governance.
Asked if the current system needed improving, 50 percent of directors said it needed some improvement, while 25 percent said it needed serious improvement.
Among specific suggestions, 74 percent said a CEO's liability for accuracy of accounts should be increased, while 73 percent called for an increase in an audit committee's liability for risk.
Seventy-two percent of the directors were in favor of a lead director and 69 percent would like to see the CEO and chairman positions split -- a major change, as traditionally the two jobs are held by the same person in corporate America.
Of the 30 large companies that make up the Dow Jones Industrial Average, only eight have split functions.
The bankruptcy filing of Enron Corp. last December -- the biggest in U.S. history -- was partly blamed on the board's weak oversight of senior executives at the Houston-based energy company. The collapse of the former Wall Street darling has fueled a call for reform.
The McKinsey survey shows that limited substantive changes in board governance have occurred over the past decade. Directors say their boards have poor oversight processes, generally lack an understanding of their businesses, and can significantly improve the performance and independence of their boards.
Directors are uneasy about liability concerns -- 25 percent turned down an offer to serve on a board or resigned a directorship in the last year due to liability concerns.
They say they are ready to embrace major governance reform. Without serious reforms, according to the survey, the governance system could break down due to a lack of qualified individuals refusing to serve as directors. |
