The Great Governance Divide: Why 60% of Companies Still Combine CEO and Chairman Roles

The Widening Gap

A governance gap is widening between American corporations and the rest of the world.

In 2025, 60.6% of S&P 100 companies still combine the CEO and Chairman roles into a single position. The person running the company is also the person running the board that oversees them.

Meanwhile, globally, 76% of jurisdictions now require or recommend separation of CEO and Chairman roles—up from just 44% in 2014. The UK, Germany, France, Australia, and most developed markets have moved decisively toward separation as governance best practice.

The result: American companies increasingly stand apart from global governance norms, maintaining combined leadership structures that most of the world has abandoned.

Who's right? The answer isn't as clear as advocates on either side suggest. The CEO-Chairman debate reveals fundamental tensions in corporate governance that have no universal resolution.

The Case for Separation

The Oversight Argument

The most powerful argument for separation is structural: the same person shouldn't manage and oversee management.

The board's fundamental responsibility is overseeing the CEO. When the CEO also chairs the board, they effectively oversee themselves. The inherent conflict of interest seems obvious.

Specific oversight concerns:

CEO evaluation: How does a board evaluate a CEO who runs board meetings, sets board agendas, and controls board information flow? The power asymmetry undermines genuine evaluation.

Compensation decisions: CEO compensation is a board responsibility. When the CEO chairs compensation discussions—even if formally recusing—their influence shapes outcomes.

Strategic challenge: Boards should challenge management strategy. When the CEO sets discussion frameworks, controls timing, and shapes information, challenge becomes difficult.

Crisis response: When problems emerge, boards need independence to assess whether CEO change is required. Combined roles make that assessment structurally compromised.

The separation argument isn't that combined-role CEOs are dishonest. It's that the structure creates conflicts that even honest people struggle to navigate.

The Accountability Argument

Separation creates clearer accountability lines.

With separation:

The CEO is accountable to the board
The Chairman is accountable to shareholders
The board has a leader whose primary job is board effectiveness
The CEO can focus entirely on management

With combination:

The CEO is accountable to... themselves as Chairman
No single person focuses primarily on board effectiveness
CEO attention divides between management and governance
Shareholders lack a clear advocate at the board level

Separation creates distinct accountability that combination blurs.

The Global Standards Argument

The global trend toward separation reflects accumulated governance wisdom.

International norms:

UK Corporate Governance Code strongly recommends separation
German two-tier boards structurally separate management and supervision
EU directives increasingly require or encourage separation
Institutional investors globally prefer separation

American companies operating internationally face pressure from global investors who expect separation. The governance gap creates friction with international shareholders, partners, and regulators.

The Crisis Evidence

Some research suggests separation helps during crises:

Crisis performance patterns:

Separated companies may respond faster to CEO performance problems
Independent chairs can mobilize board response without CEO control
Stakeholder communication benefits from distinct management and board voices
Succession planning proceeds without CEO conflicting interests

When things go wrong, separation provides structural mechanisms for response that combination doesn't.

The Case for Combination

The Unity Argument

Combination creates unified leadership with clear authority.

Unity benefits:

Decision speed: One leader can act decisively without coordination overhead. In fast-moving situations, unity enables speed separation can't match.

Message clarity: One voice speaks for company strategy and direction. Stakeholders know who's in charge. No ambiguity about ultimate authority.

Execution alignment: When the same person sets strategy and oversees its execution, alignment is automatic. No translation required between board direction and management action.

Accountability clarity: With one leader, success and failure have clear ownership. No finger-pointing between CEO and Chairman about whose responsibility outcomes were.

The combination argument is that governance complexity creates its own costs, and simplicity has value.

The COVID Evidence

Recent research provides surprising support for combination:

COVID crisis findings:

Companies with combined CEO-Chairman structures performed better during COVID
Combined leaders could "move faster and take risks"
Separation created coordination costs during rapid response requirements
Decision speed advantages outweighed oversight benefits during crisis

The COVID evidence challenges assumptions that separation always improves outcomes. In genuine emergencies, combination's speed advantages may matter more than separation's oversight benefits.

The Qualified Leaders Argument

Finding qualified, available, and effective independent Chairmen is genuinely difficult.

Chairman recruitment challenges:

Time requirements: Effective Chairmanship requires significant time—far more than typical board service. Few qualified executives can commit.

Compensation constraints: Chairman compensation, while meaningful, rarely justifies the opportunity cost for top executives still building careers.

Chemistry requirements: Chairman and CEO must work together effectively. Finding qualified candidates who also match with specific CEOs is narrow.

Industry knowledge: Effective oversight requires industry understanding. The pool of people with relevant knowledge, governance experience, and availability is small.

The separation model assumes qualified Chairmen exist. In many cases, the best available Chairman option is the CEO.

The False Independence Argument

Formal separation doesn't guarantee genuine independence.

Independence limitations:

Social dynamics: Even independent Chairmen often have relationships with CEOs. Board service is relationship-intensive. True independence is rare.

Information asymmetry: Independent Chairmen depend on management for information. CEOs control what boards know regardless of structure.

Selection dynamics: Even when boards select Chairmen, CEO influence on board composition affects outcomes. Independence is formal, not real.

The data point: Among companies that separate CEO and Chairman roles, only 34% of Chairmen are genuinely independent. The rest are former CEOs, founders, or directors with significant company relationships.

Separation advocates sometimes assume separation creates independence it doesn't actually provide.

What the Research Actually Shows

The Inconclusive Performance Data

Despite strong opinions on both sides, research on CEO-Chairman separation and company performance is remarkably inconclusive.

Research findings:

Some studies find separation improves performance
Some studies find combination improves performance
Some studies find no significant difference
Results vary by industry, company size, and time period

Why no clear answer?

Context dependency: The "right" structure depends on company situation, CEO quality, board composition, and industry dynamics. No universal structure works everywhere.

Endogeneity problems: Companies don't randomly choose structures. Companies that choose separation may differ from those that choose combination in ways that affect performance regardless of structure.

Measurement challenges: How do you measure "governance quality"? Stock performance? Crisis response? Long-term sustainability? Different metrics produce different conclusions.

The honest conclusion: Research doesn't clearly support either structure as universally superior.

What Research Does Show

While research doesn't resolve the separation debate, it does reveal relevant patterns:

Context matters:

Separation may work better in mature, stable industries
Combination may work better in fast-moving, entrepreneurial contexts
Crisis situations may favor combination for speed
Post-crisis situations may favor separation for recovery

Board quality matters more than structure:

Strong boards with engaged, independent directors can provide oversight under either structure
Weak boards provide poor oversight under either structure
Structure matters less than the people in the structure

CEO quality matters most:

Excellent CEOs produce good outcomes regardless of governance structure
Problematic CEOs create problems regardless of governance structure
Governance structure is secondary to leadership quality

The Shareholder Activism Dimension

Despite inconclusive research, shareholder activists increasingly push for separation.

The Activist Campaign

2024 activism data:

37 shareholder proposals demanded CEO-Chairman separation
Average support: 32% of votes cast
Financial services proposals averaged over 60% support
Major institutional investors increasingly support separation

The activism is growing despite—or perhaps because of—company resistance.

Why Activists Push Separation

Activist motivations:

Symbolic value: Separation represents governance reform regardless of performance impact. It signals responsiveness to shareholder concerns.

Leverage creation: Separation gives boards structural tools to challenge CEOs. Activists want boards that can act if they conclude change is needed.

Standard-setting: Activists want separation as default expectation. Individual company exceptions would require justification.

International alignment: Global institutional investors prefer separation. Activism reflects their preferences.

The Company Response

Companies typically resist separation proposals with predictable arguments:

Common company responses:

"Our current structure works for us"
"The CEO and board have excellent working relationship"
"Our Lead Independent Director provides effective oversight"
"Flexibility serves shareholders better than rigid rules"

These responses rarely satisfy activists but often persuade enough shareholders to defeat proposals.

The Lead Independent Director Compromise

Many companies address separation concerns through Lead Independent Director (LID) roles rather than structural separation.

How LID Works

Lead Independent Director responsibilities:

Chairs executive sessions (board meetings without management)
Serves as liaison between board and CEO
Available for shareholder communication
Can call board meetings independently
Leads CEO evaluation process

The LID model attempts to capture separation benefits without formal role division.

LID Effectiveness

LID advantages:

Provides independent leadership voice without full separation
Creates structural mechanism for board independence
Allows case-by-case assessment of when intervention is needed
Maintains CEO authority while creating check

LID limitations:

LID authority is ambiguous and variable
CEO still controls board information and agenda
LID role depends heavily on individual in the role
Shareholders often view LID as inadequate substitute for separation

The Board's Choice

Companies must choose among three models:

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No model dominates on all dimensions. Boards must decide which trade-offs fit their situation.

Making the Decision

Questions Boards Should Ask

About the company:

Is the company in a stable or rapidly changing environment?
What governance challenges has the company faced?
How do key shareholders view structure questions?
What international pressures exist?

About the CEO:

How long has the CEO served?
What's the CEO's track record of board engagement?
Does the CEO welcome or resist board challenge?
Is succession planning underway?

About the board:

How strong and engaged are independent directors?
Is there an obvious Chairman candidate?
Can board culture support effective oversight under either model?
What's the board's experience with the CEO?

When Separation Makes Sense

Consider separation when:

CEO tenure is long and entrenchment risk exists
Board has struggled to challenge management effectively
Major shareholders strongly prefer separation
Excellent Chairman candidate is available
Company faces governance scrutiny or crisis

When Combination Makes Sense

Consider combination when:

Company operates in fast-moving environment requiring decisive leadership
CEO has demonstrated excellent board engagement
Strong Lead Independent Director exists
Qualified Chairman candidates aren't available
Board culture enables effective oversight despite structure

The Bottom Line

The CEO-Chairman separation debate has no universal answer. Both structures can work; both can fail. Context, people, and culture matter more than org chart design.

What's clear:

Global norms increasingly favor separation
American companies increasingly stand apart from global standards
Activist pressure for separation is growing
Research doesn't definitively support either model

What boards should do:

Make deliberate, reasoned choices rather than defaulting to status quo
If choosing combination, ensure robust Lead Independent Director and strong independent board
If choosing separation, ensure genuine Chairman independence and effective CEO-Chairman relationship
Review structure periodically as circumstances change

The 60% of companies maintaining combination aren't necessarily wrong. But they should be able to articulate why combination serves their shareholders better than separation would—and that articulation should be more compelling than "it's what we've always done."

Governance structure matters. But it matters less than the quality of people within that structure and the culture they create together.

The debate will continue. The right answer will remain: it depends.