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One Job Too Many: A CEO Shouldn't Also Be Chairman

David Callahan

With Jamie Dimon under growing fire from shareholders of JP Morgan Chase, one possibility is that he may relinquish his role as chairman of the board but remain as CEO. That raises an interesting question: Why does Dimon hold both jobs to begin with? 

The answer is that it's common practice at many corporations for the CEO to also be chair, known as "duality." Surveys have found that CEOs also hold the chair position in the majority of large corporations. But why is that? After all, isn't the job of a board to supervise the CEO and organization as a whole -- or at least closely monitor things? In fact it is. So who came up with idea of having the CEO also lead the body that is supposed to be his or her boss? 

Arguments for duality rest, in part, on the idea that it is more efficient and effective to have one person fully in charge. And anyone who has ever seen the president and the board chair of an organization end up at odds knows that there is something to this logic. 

But the conflicts of interest inherent in duality would seem to militate clearly in favor of dividing these jobs. I mean, doesn't anyone remember the scandals of the Enron era, where you had imperial CEOs like Bernard Ebbers of Worldcom and Dennis Kozlowski of Tyco driving their companies into the ground? Don't people remember the way that CEOs packed boards -- and especially board compensation and audit committees -- with cronies that wrote them a blank check at shareholder expense? 

Come to think of it, forget all that ancient history. What about all the imperial bank CEOs-Chairmen, like Merrill's Stanley O'Neal, who led their firms to gorge on toxic assets without any real supervision? 

A key takeaway of all these scandals is that boards needed to be more independent, and the good news is that both regulatory changes and voluntarily corporate actions have reduced the pervasiveness of duality over the past decade. But this bad idea lives on, as we see at JP Morgan and many other companies. 

In some countries, duality is illegal. That should be the case here. 

One footnote: duality is very rare in the nonprofit sector. The president of Princeton University isn't also chair of its board of trustees. The president of Ford isn't wielding the gavel at the foundation's board meetings. Maybe there are nonprofits where the CEO and chair jobs are combined, but I don't know of any.