CEO Duality

Corporate Governance
Knowledge Center

Forum

New Topic

Mohammad Hamdan
Russian Federation

CEO Duality

🔥NEW CEO duality refers to the situation when a Chief Executive Officer (CEO), besides running the corporation at the highest level, also holds the position of the Chairman of the Board. This phenomenon can only be found in One-tier Boards. In simpler wording, it's when a firm's CEO wears 2 hats: the CEO-hat and the Chairman of the Board-hat. CEO Duality obviously affects the company in question in multiple ways, which may be positive or negative.
I would like to kick off this discussion page on CEO Duality by answering the question:

How does the CEO duality impact on the effectiveness of the company's corporate governance system?

There are at least 4 areas to consider for answering this question:
  1. BOARD EFFECTIVENESS: CEO duality night make the board of directors members and managers feel that their contribution will not make a lot of difference, because the decisions and implementations are in the hands of one person. This creates an imbalance of the power within the firm and enables one person to carry out all matters of the organization, which quickly results in highly biased and potentially ineffective decisions.
  2. BOARD INDEPENDENCE: The Cadbury Report recommends that all listed companies should have no role duality to ensure a balance of power and authority leading to more independent boards. CEO duality increases the concentration of power in the hands of one person, where the chairman plays the role of a decision-maker, supervisor, and executive manager at the same time. That will reduce the essential check over the management's performance and diminish the board's independence.
  3. EFFECTIVENESS OF MONITORING AND CONTROLLING MANAGEMENT: When two important positions are held by one person, her/his own interests might be advanced over the company's interests. Insecure directors might evaluate the firm's performance less reliably because they fear the powerful Chairman+CEO person. This may lead to long-term strategic drift. So CEO duality weakens the board's effectiveness in monitoring and controlling management. A separation of the two positions will provide checking against the possibility of ambitious plans by the Chairman/CEO. That is very important for monitoring the management.
  4. DISCLOSURE AND TRANSPARENCY: A merge of the CEO and Chairman role could lead to a conflict of interests and that could increase the chances of wrong disclosure or of decreased reporting quality. The concentration of power in CEO duality is therefore associated with reduced transparency and lower quality of corporate governance information. A separation between the two positions helps to improve the quality of supervision and reduces any advantages gained by the CEO from withholding information.
All in all, it could be said that CEO duality negatively affects the effectiveness of a firm's corporate governance system.

⇨ I am looking forward to your reactions on the effect of CEO Duality on Corporate Governance as well as other effects of CEO Duality. Please, if you have any related information, share it here.

References:
1. B. Ram Baliga, R. Charles Moyer, Ramesh S. Rao, (1996), CEO Duality and Firm Performance: What's the Fuss?, Strategic Management Journal, Vol. 17, No. 1, pp. 41-53.
2. G. Vintnla, (2013), Study on CEO Duality and Corporate Governance of Companies Listed in Bucharest Stock Exchange, Revista Română de Statistică – Supliment Trim II, pp. 88-93.
3. K. Kong-Hee, R. Buchanan, (2008), CEO Duality Leadership And Firm Risk-Taking Propensity, The Journal of Applied Business Research – First Quarter, Vol. 24, No. 1, pp. 27-42.

  Graham Williams
Management Consultant, South Africa
 

How Does the CEO Duality Impact on the Effectiveness of the Company's Corporate Governance System?

In most cases I believe that the roles of Board, L (...)

  chaovalit
Director, Thailand
 

CEO Duality Trade-off

To the point, the CEO Duality will be working well (...)

  Helen Strong
Business Consultant, South Africa
 

King IV Report Considerations for CEO Duality

@ Graham Williams: I agree that definitely the lar (...)

  Graham Williams
Management Consultant, South Africa
 

King IV Report Considerations

Agree Helen. King IV principles are very sound. Ve (...)

  John Henry
Project Manager, United States
 

An Organization Requires Cooperation at All Levels

Whenever we start with creating a one size fits al (...)

  Cecilia Calderon Kohler
Accountant, Chile
 

CEO DUALITY

La problemática Director Ejecutivo-Presidente del (...)

  Graham Williams
Management Consultant, South Africa
 

CEO Duality

Agree Cecilia. A clear, concise, well-thought-out (...)

  Jaap de Jonge
Editor, Netherlands
 

CEO Duality (or Not) is Complex. Multiple Interests are at Stake

As Mohammad Hamdan wrote so clearly, there are at (...)

  Manoj Rambajan (MBA)
Mauritius
 

CEO Duality - the Power Game

CEO Duality has a direct impact on corporate gover (...)

Start a new forum topic

 

More on Corporate Governance
Summary
Forum
Corporate Culture Vis-a-vis Societal Culture
CEO Duality
HR Involvement in CG
How to Evaluate and Measure the Effectiveness of Corporate Governance Systems?
Corporate Governance and Strategy
Corporate Governance in Family Businesses
Corporate Governance Aims
Culture and Corporate Governance
Gender Diversity (Women) in the Board of Directors
A Global Corporate Governance Body is Needed
Challenges in Corporate Governance in Africa
Corporate Governance Rules and Ethics
Why Should a Firm have Procedures and Policies?
Governance versus Management
Maintaining Creativity and Flexibility Despite of Corporate Governance Mechanisms
Corporate Governance and Compliance
Best Practices
Internal and External Corporate Governance
Agency Theory: Principal-Agent Problems
Corporate Governance: One-tier versus Two-tier Boards
Dealing with non-profit Board of Directors
Europe Reaches Agreement on Banking Supervisor: Curse or Blessing?
Governance in Public Sector Organisations
How Corporate Governance Affects the Financial Performance of Companies
Why the Interest in Corporate Governance Today?
Special Interest Group

Are you interested in Corporate Governance? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Corporate Governance
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2021 12manage - The Executive Fast Track. V15.8 - Last updated: 19-4-2021. All names ™ of their owners.