GMI Ratings Report Shows That Combined CEO/Chairmen Cost More

A GMI Ratings report shows that combined CEO/chairmen cost more, present higher ESG and accounting risk, and provide lower long‐term shareholder returns than if the positions are separated.

New York, June 28, 2012 GMI Ratings, the corporate governance, accounting and ESG research and rating firm, released today a new report that shows that the cost of employing a combined CEO/chair is 151 percent of what it costs to employ a separate CEO and chairman. Many investors, shareholders and much of the governance community has been promoting the separation of these two key roles over the last few years because it creates a balance of power in the boardroom and removes the potential for a conflict of interest when, as chairman of the board, the CEO is charged with monitoring him or herself.

Now, however, analysis by GMI Ratings shows that there is a solid, practical, economic basis for the separation of the roles. Not only do combined CEO/chairmen cost more than the sum of the compensation for a separate CEO and chair, separated roles also present a lower risk profile both from an ESG (environmental, social and governance) standpoint and an accounting risk standpoint. Not only that, but companies run by a separate CEO and chair show better long‐term shareholder returns than those run by a combined CEO and chair.

Some of the main findings of the report:

  • Executives with a combined CEO and chair role earn a median total summary compensation of just over $16 million.
  • CEOs who do not serve as chair earn $9.8 million in median total summary compensation.
  • A separate CEO and chairman earn a combined $11 million.
  • Less than one percent of companies in the sample (defined as companies with a market cap inexcess of $20 billion) with a combined chair and CEO score an ESG rating of above average compared to almost 20 percent of companies with separate roles.
  • Companies with a combined CEO and chair and an ESG rating of “F” include Goldman Sachs, NewsCorporation, Wells Fargo, Coca‐Cola Company and AT&T.
  • Corporations with combined CEO and chair roles are 86 percent more likely to register as“Aggressive” in our Accounting and Governance Risk (AGR®) model.
  • Five‐year shareholder returns are nearly 28 percent higher at companies with a separate CEO and chair.

“The validation for separating the CEO and chairman roles – already the norm in most Western economies – was already strong,” said Paul Hodgson, co‐author of the report with Senior Research Associate Greg Ruel. “With this data and analysis to back it up, it suddenly got a lot stronger.”

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About GMI Ratings

GMI Ratings is the leading independent provider of global corporate governance and ESG ratings and research. GMI Ratings’ ESG ratings, covering more than 5,400 companies worldwide, are built on extensive research and modeling that incorporate a broad spectrum of Environmental, Social and Governance (ESG) metrics. GMI Ratings also encompass accounting transparency issues, to support the goal of identifying companies at risk. GMI Ratings is widely used by leading institutional investors, banks, insurers, auditors, regulators and corporations seeking to incorporate corporate governance and ESG factors into risk assessment and decision‐making. GMI Rating’s clients have found a valuable link between GMI’s ratings and major negative events, such as regulatory actions, shareholder litigation, material financial restatements and financial distress – all of which impact investment returns and company performance. GMI Ratings is a signatory to the UnitedNations‐backed Principles for Responsible Investment Initiative (PRI), a network committed to incorporating ESG research into the investment process. GMI Ratings is the combined entity of GovernanceMetrics International, The Corporate Library and Audit Integrity, which all merged in December 2010. For more information please visit

For more information, please contact:

Joyce Brown
Phone: +1 207 553‐5679

Paul Hodgson or Greg Ruel Phone:
+1 207 691‐8724