How CEOs Work

CEO Duality and Stewardship Theory


CEO duality is a pretty hot debate. While advocates of agency theory believe that little good can come from a CEO who serves simultaneously as chairman of the board of directors, there is another side to the argument. Those who support stewardship theory maintain that when one person holds both roles, he or she is able to act more efficiently and effectively. Holding dual roles as CEO/chairman creates unity across the company's managers and board of directors, which ultimately allows the CEO to serve the shareholders even better.

Unfortunately, studies on the different situations (companies that have duality and those who do not) haven't been able to come up with a clear answer on which is better for running a company [source: Crane]. Studies seem to indicate that duality doesn't have a direct correlation to how well a company performs. One might assume that without a separate chairman to oversee the CEO, the environment is ripe for corruption. However, many are surprised to learn that even in the high-profile corporate scandals of Enron and WorldCom, which centered around CEO corruption, the companies didn't have a duality structure [source: Knowledge@Wharton].

This last fact is even more intriguing when you consider that most CEOs of big companies in the United States also act as the chairman. About 80 percent of the big corporations in the United States have a system of duality [source: Alvarez]. The same isn't true in Europe, however. There, duality is either not permitted or, as in the U.K., not very common [source: Huse].

Up until now, we haven't discussed what is actually the most hot-button issue regarding CEOs: salary. We'll get to that next.