According to Fortune, corporate governance expert Charles Elson warns that combining CEO and board chair roles creates fundamental oversight conflicts, with the CEO essentially monitoring themselves. The practice has seen a troubling resurgence at major financial institutions like Citigroup, Bank of America, and AIG, all of which have recently reverted to combined leadership roles despite separating them after the 2008-2009 financial crisis under shareholder pressure. Historically, over 90% of traded companies had combined CEO-chairs in 1990, but that dropped dramatically to just 40% of Fortune 500 companies today, though the rise of “executive chair” positions threatens to undermine this progress. Citigroup defended its structure by noting that their lead independent director handles CEO evaluations, but Elson maintains this doesn’t resolve the fundamental conflict. This reversal of corporate governance reforms raises serious questions about accountability.
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The Historical Context of Corporate Oversight
The separation of CEO and board chair roles represents one of the most significant corporate governance reforms of the past three decades. During the 1980s and early 1990s, the dominance of individual shareholders who rarely challenged management allowed CEOs to consolidate power, creating environments where boards became rubber stamps rather than effective overseers. The shift toward institutional investors in the 1990s brought more sophisticated oversight, but the 2008 financial crisis exposed how deeply flawed governance structures contributed to catastrophic risk-taking. The current trend of recombining these roles suggests corporate memory has faded regarding why separation became essential.
Why Combined Roles Create Systemic Risk
When the same person holds both the CEO and board chair positions, they effectively control the agenda, information flow, and composition of the very body tasked with overseeing their performance. This creates what governance experts call the “information asymmetry” problem – the board only sees what the CEO wants them to see. Even with a lead independent director, as Citigroup mentions, the structural power imbalance remains. The chair sets meeting agendas, controls board materials, and influences committee assignments, meaning critical discussions about CEO performance, strategy, and risk management may never occur without the CEO’s approval. This isn’t just theoretical – research from institutions like the University of Delaware has consistently shown that companies with separate chairs have better financial performance and lower fraud incidence.
The Executive Chair End-Run Around Governance
The emergence of the “executive chair” role represents a sophisticated workaround that maintains CEO control while appearing to comply with governance standards. This position, often filled by recently retired CEOs, allows the outgoing leader to maintain operational influence while technically separating the titles. The result is that the new CEO operates under the shadow of their predecessor, who still chairs the board and oversees daily operations. This creates confusion about who’s actually in charge and undermines the new CEO’s authority while maintaining the old power structure. It’s governance theater rather than substantive reform, and it’s becoming increasingly common as companies seek to placate governance critics without surrendering control.
What This Means for Investors and Markets
The regression toward combined leadership roles should concern all stakeholders. For investors, it signals reduced board independence and potentially higher risk tolerance. Companies with combined CEO-chairs tend to take on more debt, pursue riskier acquisitions, and provide less transparent disclosure. The fact that major financial institutions are leading this trend is particularly alarming given their systemic importance and the recent memory of 2008 bailouts. The move suggests that short-term stock performance is being prioritized over long-term stability and accountability. As independent oversight diminishes, the potential for governance failures increases, creating vulnerabilities that could have broad market consequences.
The Path Forward for Corporate Accountability
Reversing this trend will require renewed pressure from institutional investors, regulatory guidance, and perhaps most importantly, consequences for poor governance. The current environment of strong markets and robust corporate profits has created complacency about governance structures, but history shows that these issues become critical during downturns. Companies adopting combined roles may face higher borrowing costs, shareholder activism, and eventually regulatory scrutiny if governance failures emerge. The question isn’t whether these structures will create problems, but when – and how severe the consequences will be for investors, employees, and the broader economy when they do.
