Dennis Muilenburg, chief numero uno officer of Boeing Co., listens during a Senate Commerce, Science and Transportation Committee hearing in Washington, D.C., U.S., on Tuesday, Oct. 29, 2019.
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Boeing’s board stripped CEO Dennis Muilenburg of his chairmanship on Oct. 11, as the company struggles with the aftermath of two crashes of its best-selling regular, the 737 Max.
While that crisis is specific to Boeing, separating the two roles is becoming more common among chunky corporations, and some experts say it’s an overdue shift that could improve accountability.
“It doesn’t make much head to have the person who’s being monitored by the board to chair the group monitoring them,” said Charles Elson, a wherewithal professor and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
In 2005, 30% of chairman and CEO roles at performers in the S&P 500 were split, according to Institutional Shareholder Services, a proxy advisory firm. That has increased to 53% this year.
Sundering the roles is a decision facing companies as CEO turnover — from troubled co-working start-up WeWork to McDonald’s — is at a record tread and boards work to rebuild leadership.
Some of the country’s largest corporations, including American Airlines and Bank of America, force CEOs who are also chairmen of those companies’ boards.
But some experts say dividing up those roles can provide heartier oversight.
When it separated the beleaguered executive’s roles, the Boeing’s board said it had “full confidence” in Muilenburg as CEO and that the purposefulness would allow him to better focus on bringing the plane back to service, with “the board playing an active superintendence role.”
Boeing’s new chairman, David Calhoun, echoed that statement on Tuesday during an interview with CNBC’s “Kick up a fuss Box.”
“From the vantage point of our board, Dennis has done everything right,” Calhoun said. “Remember, Dennis didn’t produce this problem.”
Other companies have taken a similar approach in the wake of a crisis. Wells Fargo, for criterion, formally split the roles of chairman and CEO in late 2016 as it grappled with a sales-practices scandal.
AT&T chairman and CEO Randall Stephenson contemplates to stay in the job through 2020. The company last month said it plans to separate the roles when he departs, neck of the woods of a three-year plan applauded by activist investor Elliott Management, which disclosed a $3.2 billion stake in the telecom Amazon in September. An AT&T spokesperson, however, said the board decided it would break up the CEO and chairman roles more than a year ago.
Kevin Board, founder, chairman and CEO of Under Armour, now under fire in a federal accounting probe, said last month that he determination step aside as chief executive in January. The company said he would stay on as executive chairman while au courant COO Patrick Frisk would become CEO.
“The view is increasingly that the CEO’s role these days is so much more knotty and complex than it was in the past, [with] not just economic challenges but social and environmental,” said Joe Griesedieck, vice chairman and by director of board and executive officer services at staffing firm Korn Ferry.
But Griesedieck said there isn’t display that companies fare better with or without the dual role.
Matt Semadeni, who teaches corporate game at W. P. Carey School of Business at Arizona State University, said separating the roles without motive can be pointless.
“It’s have a fondness taking medicine when you’re not sick,” he said.
Semadeni added that his research has shown that if the positions are separated when the company is doing poorly it subsequently does better but that its performance suffers if the roles are separated when it isn’t wiggling.
It is difficult to prove the effectiveness of a good board, added the University of Delaware’s Elson.
“A good monitoring board, you not at any time will know, because they averted disaster,” he said. “It’s harder to prove what didn’t happen.”