Knowledge at the heart of leadership
Welcome to Liftstream - Life Sciences Executive Search and Leadership Advisory

Should you separate the role of CEO and Chair?

 

The Chairperson and CEO are the power-axis of most company leadership structures. There are arguments for and against combining the CEO and Chair roles. Clearly, the vacancy of a Chair position provides an opportunity for the CEO to consolidate power by combining both posts. This allows the CEO, who has the greatest influence on a company’s culture, to begin to set the cultural tone from the board too. Whereas, the presence of an independent Chair allows the board to create a value system and to task the CEO with delivering it across the organisation.

Liftstream, along with many experts of corporate governance, is an advocate for splitting the role of CEO and Chairman, but we also advocate reviewing individual context to explore the company’s needs, strengths and weaknesses, as well as environmental factors – all of which would help to determine the right governance model. However, a trend for more independent governance is winning out across the biotechnology industry, placing combined CEO/Chairs very much in the minority. In our study of San Diego public biotechnology corporate boards, we found that 82% of companies have split the CEO and Chair roles, a figure which is consistent with the year over year increase in this role separation witnessed across broader indices. Similar statistic was also reported in our 2017 study of 177 biotech companies which conducted an IPO in the USA between January 2011 and December 2015.

Companies which are enlightened to the benefits of good governance and split CEO and Chair roles, often show a stronger commitment to diversity. This, as some commentators suggest, is what leads to these companies outperforming their peers. We believe we found a confirmation of this hypothesis in our study of the boards of directors as biotech companies transfer from private to publicly listed. Within the group of companies which had separated the role of CEO and Chairperson, diverse boards were the majority. Additionally, a larger proportion of all-male boards had the role of CEO and Chairperson combined. For the first time, we have found a clear link between separating the Chair and CEO roles and increased gender diversity of the board.

We can conclude that separation of the Chair and CEO contributes to an enlightened board presiding over an inclusive and diverse culture, and similarly, we see the effect of the culture on the financial performance of the companies with diverse boards. This mandates the need for continued research to establish the degree to which the power and cultural dominance brought by unifying the Chair and CEO roles shapes board diversity, versus the diverse board which chooses to separate these functions.

Liftstream uses evidence to shape the future workplace of life sciences companies. #ElevateMyBio

Get started! 

 

 

Posted in Uncategorized | Tagged , , , , , , , , , , , , , , , , , , , , | Leave a comment




Contact Us

   Liftstream Ltd.
67 Grosvenor Street
London
W1K 3JN

   Tel: ​+44 (0)20 3178 5864
   info@liftstream.com

Register your CV

Apply for sector specific vacancies or request a confidential discussion



Registered in England No: 5009233
VAT: 843679292

Follow Us





Sitemap