When Bank of America (BAC) was in deep trouble due to write-offs and possible scandals about payments to employees at Merrill Lynch just before it was acquired by the huge bank, a number of investors called for chairman and CEO Ken Lewis to step down. A more moderate group of shareholders suggest that Lewis give up his job as chairman to another board member and remain as CEO.
The theory that separating the chairman and CEO roles is important to good working practices has been around for decades. It is based on the simple premise that having too much power in the hands of one person at the top of a company makes it harder for the corporate governance process to work. The logic goes further to say that the board of directors should be an independent entity led by a person who is not an employee of the company.
What may work in theory may make little sense in fact. The issues of strong governance really has almost nothing to do with who has the role of chairman and everything to do with whether a board is willing to assert its rights and duties to make certain that a company is well-run for the benefit of shareholders and not the self-serving interests of management. Under SEC regulations, boards have broad powers no matter who sits in the chairman's seat.
According to The Wall Street Journal, "Pressure is building for the possible separation of the chairman and chief-executive roles at Bank of America Corp." Whether the effort is a success or not doesn't matter much. A weak board is a weak board and the person who sits at the head of the table doesn't change that.
Douglas A. McIntyre is an editor at 24/7 Wall St.