GMI Blog – Report Shows That Combined CEO/Chairmen Cost More

The following entry appeared as part of GovernanceMetrics International’s GMI Blog. GMI is the leading independent provider of global corporate governance and ESG ratings and research. Corporate stakeholders – including leading investors, insurers, auditors, regulators and others – use GovernanceMetrics services to identify and monitor risks related to non-financial measures covering key environmental, social, governance and accounting risk factors.

GMI Ratings today released a report which not only shows that combined CEO/chairmen cost more, but also that they present higher ESG and accounting risk, and provide lower long-term shareholder returns than if the positions are separated.

Some of the main findings of the report:

・Executives with a combined CEO and chair role earn a median total summary compensation of just over $16 million.
・CEO plus a separate chairman earn a combined $11 million.
・Less than one percent of companies in the sample (defined as companies with a market cap in excess of $20 billion) with a combined chair and CEO score an ESG rating of above average compared to almost 20 percent of companies with separate roles.
・Corporations with combined CEO and chair roles are 86 percent more likely to register as Aggressive in our Accounting and Governance Risk (AGR®) model.
・Five-year shareholders returns are nearly 28 percent higher at companies with a separate CEO and chair.

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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