Corporate Leadership Structure: On the Separation of the Positions of CEO and Chairman of the Board

Abstract

Shareholders activists and regulators are pressuring U.S. firms to separate the titles of CEO and Chairman of the Board. They argue that separating the titles will reduce agency costs in corporations as well as potentials benefits. Our empirical evidence provides preliminary support for the hypothesis that the costs of separation are larger than the benefits for most firms. Our results also call into question previous empirical work which suggests that firms with separate titles outperform firms with combined titles. We tentatively conclude that proponents of legislation to force separation of titles have overlooked important costs.

JEL Classification: G30