A big U.S. union pension fund wants Jamie Dimon to give up one of his titles. The JPMorgan boss is far from alone among U.S. executives in holding both the chairman and chief executive jobs. Renewed and welcome efforts to bring about a switch to a U.K.-style separation are long overdue a stateside embrace.
The pension plan of the American Federation of State, County and Municipal Employees was keen on shareholders getting a say on the pay of top executives, too. Though an uphill struggle only five years ago, this is now a requirement. Today’s votes are non-binding, but still send a message that keeps boards alert to the perception of excess.
Measures to split the chairman and CEO roles at nearly two dozen Russell 3000 companies last year attracted the support of about a third of shareholders, up from 28 per cent the year before, according to proxy adviser Institutional Shareholder Services. The Chairmen’s Forum, a group of board leaders, is also set to reinvigorate efforts to promote independent chairmanship, according to The Wall Street Journal.
Separating the top jobs ensures someone is empowered to question the chief executive. It also allows the CEO to focus, especially during tricky times, on running a company while the chairman manages its board and deals with shareholders, politicians and other outside constituencies.
True, a single chairman-CEO can often make big decisions more quickly. But that only underlines the point: The objection concedes there’s a shortage of accountability when the roles are combined. It’s also easy to find times when a company with the jobs split hasn’t benefited. BP in the aftermath of its Gulf of Mexico oil spill springs to mind.
But such examples are more about the people than the concept. Mandatory or not, splitting the roles is a better governance “default model,” as the Chairmen’s Forum puts it. At the very least, companies should explain when they opt not to do it. For now, a fairly small, if growing, minority of U.S. public companies has embraced division at the top. But like the “say on pay” idea, with renewed momentum it could, finally, become the norm.