Board Leadership Structure: Split Versus Combined CEO/Chair

In brief: The debate over which board leadership structure is optimal—an independent chair or a combined CEO/chair with a lead independent director—has no exact resolution. NACD supports the position that either board leadership structure can work. How the structure is enacted likely has a more significant impact than which structure is chosen. This memo reviews leading practices for implementing a board leadership structure, relevant trends, and investor perspectives.

The focus on the board’s compensation committee has never been sharper. The components of compensation plans and the link between compensation and company performance are under intense scrutiny from shareholders, employees, policymakers, the media, and other stakeholders. The Report of the NACD Blue Ribbon Commission on the Compensation Committee revisits NACD’s 2003 Report of the NACD Blue Ribbon Commission on Executive Compensation to highlight the new environment in which compensation committees—and, more broadly, boards—are now operating. It recommends that the compensation committee and board work together to establish an executive compensation philosophy that supports the company in creating long-term, sustainable value.

The report includes ten specific recommendations for compensation committees to consider when evaluating their compensation philosophies. It also provides practical tools, such as sample compensation committee charters, a compensation committee assessment, and guidance on executive employment contracts.