by Markus Menz, Robert Langan, and Ryan Krause
Companies like Amazon, Google, and Iron Mountain have opted for an executive board chair in recent years. Separate from the CEO, the executive board chair is typically responsible for both oversight and strategic decision-making. The authors studied S&P 1500 companies from 2002 to 2020 to understand what a board chair does, and when such a position might be beneficial to a company. They found that companies that used the executive chair position for a limited period during a CEO succession significantly outperformed those that did not.
On February 2, 2021, Jeff Bezos announced that he would “transition to Executive Chair of the Amazon Board and Andy Jassy will become CEO.” While this change marked a major corporate governance shift for Amazon, executive board chairs have become increasingly common. According to Spencer Stuart, 15% of board chairs in the S&P 500 were designated as “executive chair” in 2021. Companies like Autodesk, Ford, Google, Iron Mountain, Occidental Petroleum, and Oracle have opted for an executive board chair in recent years.
Yet, to our surprise, few people understand what an executive board chair does, who tends to hold the position, and whether they benefit their company. To explore these questions, we identified 289 companies from the S&P 1500 index that had an executive board chair at some point between 2003 and 2017. Using data through 2020 from the BoardEx, Execucomp, Compustat, and SDC’s mergers and acquisitions databases, we compared these companies’ yearly performance with an executive chair to their performance with another type of board chair (i.e., non-executive chair or CEO-chair). To better understand this new position, we also examined the press releases of over 500 executive chair appointments by these companies. We discovered that the executive board chair has become an important board leadership innovation that has performance consequences for the organization.more