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I'm part of a fairly large family business and we are trying to exercise better corporate governance after a legal battle involving a family member and shareholder. One of the concerns I have is the role of CEO and Executive Chairman belonging to the same individual in the company. I was told recently that if the Chairman is also employed with the company then they're considered an Executive Chairman and that the Executive Chairman role should be held by the same person who is the CEO. The other option is to have the role of Chairman be non-executive but that person cannot be employed by the company. The literature I've read so far doesn't seem to support this claim. My question is, can the CEO and Chairman be held by two separate people who are both employed (and hold executive positions) with the company?

Thanks!

  • A country tag would be appreciated – David Aug 28 at 10:11
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Depends on the Country but the best practice is to have an independent Chair i.e. not an employee. The Chair works for all the share holders and not the company its self.

The UK formal guidance is they are separate roles and the Chairman is not an employee, break this guidance and dependant on the size of the company and you will get some blow back.

This is probably more a legal Q as Chairs are not employees as such.

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In North America at least, it is very much possible to have an Executive Chairman who is different from the CEO. It does raise some questions, however, since the normal division of labour between a Chairman and a CEO is one of strategy vs. operation/execution. If the Chairman is ultimately responsible for both the former and the latter, what is the purpose of assigning the "CEO" title to someone else? The normal implications of the CEO title - ultimate responsibility for execution subordinate only to the strategic direction of the board - would not be valid. It would seem most accurate at that point to assign a title like "President" or "Senior Vice President" or "Head" or something similar.

One possible reason for doing this, especially in a family company, is succession: a long-tenured Executive Chairman can appoint their expected successor as CEO and gradually transition operational responsibilities to them. In the short term, they maintain their Executive Chairmanship, and slowly transition out to a non-Executive Chair, or out of the company altogether.

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You should ask for advice from a small business lawyer on questions of business structure. The structure you choose must first comply with local regulations, and second, be an effective structure for managing your business.

In the United States, the structure of your business is, to some extent, dictated by the regulations under which your business was incorporated. For example, C-corps must have directors (your chairman would be a director) which typically delegate to managers (e.g., a CEO) but may also retain those responsibilities (e.g., a “Chairman and CEO”).

Additionally, ownership, financial interest, and management interest are all separately assignable (e.g., a majority owner may not have a majority vote in decisions). How these interests are assigned may be more relevant to avoiding future arguments than management structure. Again, a small business lawyer is who you should look to for guidance.

Sorry you’ve been having trouble. I hope it is resolved quickly and you see only smooth sailing from now on.

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