For Dimon and Board Leaders: Function Matters, Not Form
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2013-05-17
One of the dumbest corporate governance issues is whether to split the roles of Board Chair and CEO. That debate is now playing out on the front pages of business sections (print and online) as shareholders will decide next week in a nonbinding vote whether to take the chairman of the board title away from JP Morgan CEO Jamie Dimon.
This is a reprise, for the zillionth time, of the pointless push by governance types to call the senior director "chairman of the board" rather than "lead" or "presiding" director and to deny the CEO the chairman of the board title. (Dimon, of course, is today Chairman of the Board and CEO of JP Morgan; Lee Raymond is JPM's "lead" director.)
What is lost in virtually all stories and commentary hyping the Dimon election is an answer to the basic question: what is the function of the lead director? It is this issue of function, not form (i.e., what title that senior director carries), which is crucial.
It has been a governance verity, if not always a reality, that a strong board should provide oversight and constructive criticism to the CEO and other company leaders.
Since Enron, this basic principle has been implemented in most companies by designating one director to be first among equals, whatever her title. That director performs at least the following core roles (as I have discussed in detail elsewhere):