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Performance of 309 companies that split CEO and chair responsibilities.
Ryan Krause is a guy who carried out the research for Indiana university's Kelly school of business.
He joins me now in a Fox Business exclusive let's get to what what did you find here everybody wants to know does this really make a difference.
In pure academic fashion of course the answer is it depends yeah.
And see what it depends -- parcel thank you for having.
At what it depends on is how the firm is performing.
When they go through a separation so we conducted this study.
Where we collected data on about 300 firms.
Between 2002 in 2006.
That underwent a CEO board -- separation and we found two very interesting things.
One is that the only -- separation that impacts -- performance is what we call a demotion separation.
Where the CEO remains the same but a new independent chair.
Is brought -- the other types where you keep this he keeps a chair position but they bring in a CEO or or -- from entirely don't matter.
So the the demotion as the only kind that matters and what.
It that the effects of a demotion.
Depend on how the firm is performing when that emotion happens so the firm is performing well.
You're gonna see a huge drop -- performance the next year okay our local Islamic -- -- -- that so if a company is doing well and they decide to undergo this split suddenly.
It's not good for the stock right.
That's what the data shows that the company is performing just -- they go through a demotion separation.
The stock tanks in the next year great conversely while you give an example of where that happened a company where they underwent a split the company was doing well.
Yeah off the top of my head one company and our samples come o'clock PMC-Sierra.
She went through a demotion separation in 2004.
I believe in a year when they saw 70% return to shareholder value.
In the subsequent year they gave back about half that return.
-- -- the question really becomes Ryan that went -- a chairman.
And a CEO or the same person is that good because perhaps a CEO remains on a post and therefore feels very free.
To come up with ideas or is it important to have a sense of checks and balances.
I think the answer is that it again it depends.
It depends on who the people are and it depends on how the firm is performing so yes there are some pros to separating the positions one is that.
You get better accountability ostensibly the chairs performing his or her role correctly you're greater accountability for the CEO.
You can the CEO can also off load some burdens onto the chair of the chair can fill certain roles of the -- might not have time to do.
On the other hand yes it can slow down decision making I've talked with a number of CEOs he said that.
If they didn't have the chair or that separate chairs that they.
Did right I have to deal with slow down their decision may -- and it can also cause confusion.
The decision at -- Jamie Dimon is may 21.
That's when the shareholders vote on this Fox Business will cover this extensively.
Let's just call what it is going to be a circus but we -- watching it very closely Ryan thank you I'm sure he will tell you thanks for joining us absolutely thank you.
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