In reading the news about Bank of America shareholders voting to strip Ken Lewis of his chairmanship title I wondered whether small companies need to think about such things. In small companies where the founder is typically CEO and chairman of the board, should those titles be separated?
John May, chairman emeritus of the Angel Capital Association and managing partner of New Vantage Group which creates and manages funds for angel investors, says that is an issue small firms need to think about. At the recent ACA summit in Atlanta, May says there were a lot of discussion around governance and what structure makes sense.
May’s view: If a company has big growth plans, splitting the CEO and chairmanship may be a good idea. He puts it this way:
CEO’s are often reluctant to have an outside chairman. Until they get enough traction with the business, the governance issues are subservient to the issues of cash flow. But wouldn’t it be better to let the board agenda and those governance issues be taken up by someone who’s been around the block before?
That thinking is getting more attention in the world of big business. In late March, The Chairmen’s Forum, a group of independent board chairmen, issued a briefing urging large U.S. companies to split the roles of board chairman and CEO. The group says the U.S. still lags other nations in adopting this approach.
Of course for entrepreneurs building a business, such a move means giving up a bit of control. Still if you have grand ambitions, probably doesn’t hurt to set in place an infrastructure to match that.