On 4 January, General Motors announced
that it was appointing its current CEO, Mary Barra, to the position of chairman; a unanimous decision of the board. The position of chairman was previously held by Theodore Solso, who remains on the board as lead independent director. The move was unilaterally seen as a promotion for Barra, a congratulatory move because of her excellent performance as CEO. Solso said in the press release: “… the Board concluded it is in the best interests of the company to combine the roles of Chair and CEO in order to drive the most efficient execution of our plan and vision for the future.”
It seems to me fundamentally wrong to award the chairmanship to a sitting CEO doing a great job as some kind of reward. I’d far rather have seen her get a pay rise; no pay increase was associated with the “promotion.”
As last year’s proxy statement said: “Our Bylaws and Corporate Governance Guidelines provide the Board with flexibility to select the appropriate leadership structure for the Company.” This board authority was reinforced when just 36 per cent of shareholders supported James McRitchie’s stockholder proposal to make an independent chairman a permanent feature. The same resolution was filed in 2014 and received a similar level of support. As examples, both the Ontario Teachers’ Pension Plan and the State Board of Administration in Florida supported both these resolutions. Solso also said: “The Board also plans to broaden its active engagement with shareholders as we go forward.”One wonders what it will be saying to the shareholders who voted for an independent chairman.
In fact, as the Detroit Free Press pointed out, GM has a long history of initially appointing CEOs and then electing them chairman of the board a year or less later. For example, Dan Akerson, the CEO before Barra, was appointed CEO in September 2010 and chairman in January 2011.
The point here is how did that work out for GM? Bankruptcy and a horrendous scandal over faulty ignition switches.
Did no one on the GM board think that combining the jobs of chairman and CEO, and thus institutionalizing lack of oversight, might have had something to do with that? No one is suggesting that Barra is likely to behave in the same way, but why make it easier for her to do so? It has rarely been said better than by the quotation in McRitchie’s resolution from Intel’s former chair Andrew Grove: “Is a company a sandbox for the CEO, or is the CEO an employee? If he’s an employee, he needs a boss, and that boss is the Board. The Chairman runs the Board. How can the CEO be his own boss?”
The company’s bylaws and Corporate Governance Guidelines say that the role of independent chairman is “closely aligned” with the role of lead independent director. Why not continue to call that person chairman then? Which is exactly what I said about the Bank of America decision. According to Robert McCormick, chief policy officer at Glass Lewis, the GM decision is unlikely to cause as much unrest as the BofA move because it was handled much more appropriately. GM may have handled the process better, but it was still the wrong decision.