IOA Governance Resolutions: Separate Chair and CEO

Independent Chair: 

Investors rely on the Board to represent their interests.  All resolutions filed for the 2021 season asked for an “independent chair”.  IOPA members believe that an independent chair, who has not previously served in management and who has no business or employment ties to the company, is critical to ensuring that difficult questions are asked of management, when necessary, and that decisions are made in the best long‐term interests of shareholders and the company.  

This board practice is of particular importance when a company is embattled in legal actions such as the current suits over opioids; a time when investors need confidence in strong, independent board leadership.  In addition, future regulatory or compliance problems may be avoided if management knows there is strong, independent board oversight of the company’s actions.  An independent chair can also assist board members in obtaining independent sources of information and evaluations of the business strategy that they might not have if the positions are combined. 

Separate Chair and CEO:

IOPA proposals filed before the 2021 season asked for the Chair to be separated from the CEO.  The number of S&P 500 companies with combined Chair and CEO roles is now at an all-time low of 45.6%.[1] However, separating the chair and CEO does not always translate into independent leadership; in fact, many separate Chairs are former CEOs of the company.  Lead Independent Director are not an adequate substitute for an independent chair because at the end of the day, while they offer an alternative means for shareholders to communicate with the board, they do not lead the board or set the tone.

An Independent Chair has the ability to set the agenda for board of director meetings, which is one of the most important leadership and business strategy duties an Independent Chair assumes and is not a duty a Lead Independent Director can deliver on when the roles are combined.  Therefore, IOPA members believe that the benefits of ensuring that companies engage a qualified, independent chairperson must be emphasized because an Independent or external chair is best able to represent shareholder interests.

IOPA Companies with Independent Chair

Company

Type

AmerisourceBergenϮ

Distributor

Assertio Therapeutics (Depomed)*

Manufacturer

Cardinal Health

Distributor

CVS

Retail Pharmacy

Insys - declared bankruptcy in 2019

Manufacturer

Mallinckrodt*

Manufacturer

McKesson

Distributor

Teva*

Manufacturer

 

IOPA Companies without an Independent Chair

Company

Type

Mylan/Viatris

Manufacturer

Endo

Manufacturer

Pfizer

Manufacturer

 

IOPA Companies with Combined Chair and CEO

Company

Type

AbbVie**

Manufacturer

Amazon**

Distributor

Bristol Myer Squibb**

Manufacturer

Eli Lilly**

Manufacturer

Gilead**

Manufacturer

Johnson & Johnson**

Manufacturer

Rite Aid

Retail Pharmacy

Walgreens

Retail Pharmacy

Walmart

Retail Pharmacy

 

Notes:

 

Ϯ AmerisourceBergen plans to implement separation of Chair & CEO upon current Chair's retirement.

* Companies with Independent Chair prior to IOPA

**Companies where Independent Chair proposal filed in 2021



[1] Mengqi Sun, More U.S. Companies Separating Chief Executive and Chairman roles, Wall Street Journal (January 22, 2019) available at https://www.wsj.com/articles/more-u-s-companies-separating-chief-executive-and-chairman-roles-11548288502

 

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