5 Pages Posted: 25 Aug 2011 Last revised: 3 Sep 2013
Date Written: August 17, 2011
By many measures, current CEOs should be the best candidates to serve on boards of directors. They have extensive strategic, operational, and risk management expertise, as well as experiences and leadership attributes that are important for a firm’s long-term success.
However, there is currently no widely accepted, rigorous study that demonstrates that current CEOs are better board members or that companies with CEO directors benefit in terms of improved advice or monitoring. In fact, recent survey data suggests that active CEOs might not always be the best board members because of the time constraints of their full time job and personality attributes that may make it difficult for them to contribute constructively to a boardroom environment.
We examine this issue in closer detail and ask: 1. Should companies reassess the importance of this criteria when looking for new board members? 2. Does the requirement for CEO-level experience limit the pool of available directors, particularly diversity candidates who may be less likely to have this experience? 3. If the availability of CEO directors is low, should professional directors be recruited to fill the gap? 4. Do the positive qualities of a retired CEO deteriorate, or do they never become outdated?
Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the book Corporate Governance Matters, and A Real Look at Real World Corporate Governance.
Keywords: corporate governance, board of directors, CEOs as board members, decision-making
JEL Classification: D71, D83, G 30, G34
Suggested Citation: Suggested Citation
Larcker, David F. and Tayan, Brian, Are Current CEOs the Best Board Members? (August 17, 2011). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-18. Available at SSRN: https://ssrn.com/abstract=1915618 or http://dx.doi.org/10.2139/ssrn.1915618