Definition #45 - CEO/Chair Split

Each week, we will release two illustrated definitions of corporate governance jargon in order of increasing complexity. In this instalment we have the definition of "CEO/Chair Split". Check the episode thumbnail for an illustration by Nate Schmold.

Originally published February 6, 2023

What is Sound-Up Governance?

The real impact of corporate governance isn't about compliance or structure or policies, it's about the conditions that impact decision-making. Sound-Up Governance features fresh perspectives to help boards and executives to be a bit better tomorrow than they were yesterday.

One way that a lot of corporations try to make it easier for the board to know how well the corporation and the CEO are doing is by making the CEO a director, or maybe even the board chair! You can imagine why this might make sense for a lot of companies. Take Reallie Steilish, for example. At the beginning, you were the only shareholder and board member, while also being the one who, you know, did everything else. You might decide at some point to bring more directors onto the board, but if you’re like most business owners you probably want to be the board chair – because you understand the business better than anyone, because you want to have as much control as possible, and because being board chair is cool and feels good. For a long, long time it was super common for CEOs to also be board chairs in most sectors. Now it’s not really very common at all in some parts of the world. So, what happened?

Well, even though it’s cool and feels good to be both board chair and CEO it’s not always as fun as it sounds. It also probably isn’t always what’s best for your corporation. First of all, CEOs basically always have too much work to do. Most of the estimates out there show that a typical CEO of a big company spends about 8 hours working EVERY DAY OF THE YEAR, or about 12 hours for every normal work day. And we already know that being a good board chair also takes a lot of work, so… Being CEO *and* board chair is a REEEALY big commitment. Another weird thing about being chair and CEO is that the board chair is *sort of* the boss of the board and the board is *literally* the boss of the CEO – so you’re YOU, and you’re your own boss, and you’re your boss’s boss all at the same time. It’s a bit of a missed opportunity. You could have had three (or more) smart people making important decisions instead of one.

Anyway, when talking about situations where the board chair and CEO roles are held by different people, Ground-Up Governance will call it a “CEO-Chair Split”. If you’re thinking of a banana split, then you’ve definitely been paying attention to some of the visual themes of Ground-Up Governance.