CFO

Should the CEO Serve as Chairman, too?

Today’s post is by Randy Russon, founder of TOPCFOS

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When it comes to corporate governance, the role of an effective board is to set policy and guide the firm they lead into creating greater shareholder value for its shareholders. The board is ultimately responsible for the welfare of the organization. At the same time, the board is not involved in the day-to-day affairs of the firm, but merely oversees everything that goes on. In managing the affairs of a company, a key role the board plays is that of solving problems the CEO brings to the board. Boards who can solve these problems effectively bring real value to the table. The board is who the CEO reports to.

On the other hand, the role of the CEO is to manage the day-to-day affairs of the firm and to implement all the decisions made by the board. The CEO’s job is to carry out the vision and mission of the board. A great CEO is someone who sees the vision and does everything in his or her power to carry out this vision. What if the CEO also serves as chairman of the board, too?

This can become problematic if the board sees that it’s time for the CEO to be replaced. In his book entitled, “Chairman of the Board: A Practical Guide” Brian Lechem talks about this dilemma. “There have been many high-profile corporate situations in recent years where it has been found necessary to change the CEO. In many instances the change occurred well after it had become apparent that something radical needed to be done. Many of these circumstances involved a CEO who also held the position of board chairman. By virtue of personality, character, and often sheer forcefulness, the CEO/chairman could intimidate boardroom colleagues to the extent that they deferred action longer than was necessary. By virtue of the power of the two positions, the CEO/chairman can maintain control even when a company is failing.”

This is where the real dilemma comes into play when the chairman of the board also serves as its CEO. This is why it’s imperative that the board be made up of strong personalities who are not afraid to take action and not let this dual role of CEO/chairman stand in the way of implementing changes that are in the best interest of the organization. This is especially true when the CEO needs to be replaced. Boards need to be wise and take action in spite of this dual role.

We hope you’ve enjoyed our Blog today. Please remember, TOP CFOS offers the finest CFO services to companies anywhere in the world and would love to be a part of your team. Feel free to reach out to us anytime. Your feedback is most welcome, and we invite you to share this post with friends and associates. Our contact information can easily be found here on our website, so give us a call today! Our next post will come from the Technology category on our website and is entitled Technology – Keeping A Perspective. And, thank you for joining us!