CEO/Chair Duality in the Sarbanes–Oxley Era: Board Independence Versus Unity of Command

Abstract

CEO duality occurs when the same individual holds both the CEO and board Chair positions. In some countries (such as Britain) CEO duality is considered to impair good corporate governance. In the United States, however, CEO duality is still a common practice. The Sarbanes–Oxley Act (SOX) included many corporate governance reforms, but the Act did not address the issue of CEO duality. However, we suggest that the corporate governance environment surrounding the passage of SOX may have influenced corporate board decisions regarding CEO duality when appointing new CEOs. In this study, we seek to determine whether CEO duality changed in the post-Sox environment by investigating the likelihood of CEO duality when CEO changes took place before and after SOX. Using a sample of 182 CEO succession events before and after the passage of SOX, we find that the likelihood of combining the CEO and Chair positions for newly appointed CEOs significantly decreased in the post-SOX period relative to the pre-SOX period. Our results suggest the SOX environment fostered a greater focus on governance issues even beyond the specific provisions of SOX.

Citation

Cullinan, C.P., Barton Roush, P. and Zheng, X. (2012), "CEO/Chair Duality in the Sarbanes–Oxley Era: Board Independence Versus Unity of Command", Jeffrey, C. (Ed.) Research on Professional Responsibility and Ethics in Accounting (Research on Professional Responsibility and Ethics in Accounting, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 167-183. https://doi.org/10.1108/S1574-0765(2012)0000016009