We asked the board of this company to consider improving independence and oversight by separating the roles of CEO and chair. We typically support shareholder proposals asking companies to separate their CEO and chair roles because we believe that an independent chair is better able to oversee executives and set an agenda, and separating the roles eliminates the inevitable conflict of interest when a CEO is responsible for self-oversight.
We met with members of management before the annual general meeting to better understand the board’s unique committee structure and division of responsibilities among directors and executives.
The ESG analyst worried that a combined CEO/chair prevented a balance of influence from the other directors. Several directors were long tenured, which raised questions about whether their objectivity could be compromised by their long-standing relationship with the CEO/chair. The ESG analyst was also concerned about the board’s committee structure, which combined all key committee functions into a single committee.
- Separate CEO and chair roles
We supported a shareholder proposal to separate the role of CEO/chair, which received 40% support from shareholders. A fixed income portfolio manager considered the ESG analyst’s negative view, noting that the security he held did not trade with a discount to account for this risk, and decided to reduce his holding.
While the proposal received considerable support from shareholders, the company has not committed to any changes in leadership structure. A new shareholder proposal to separate CEO and chair will be on the 2020 ballot.