Why Force Your CEO to Be Chairman?

Gary Wilson finds an interesting bylaw in some of America's bluest blue-chip companies:

Such companies as General Electric (GE), Coca-Cola (KO), Exxon Mobil (XOM), (UPS), Deere (DE), Caterpillar (CAT), (CSX) and Johnson & Johnson (JNJ) actually have bylaws that require the CEO to also serve as chairman.

I've been racking my brain, and can't think of a single reason why such bylaws should be so common. It's hard enough to think why the CEO should also be chairman at the best of times, but in exceptional circumstances maybe that can genuinely be what the board thinks is best. It does seem obvious, however, that such determinations can only be made once you know who the CEO is.

The two jobs are different, after all, and require different skillsets. Is it possible that a CEO will also make a good chairman? Yes. Is it necessarily the case? No. By adopting such a bylaw, the board is tying one hand behind its back when it comes to the CEO succession process. Not only does it need to find someone who will be a good CEO -- which is hard enough -- but it needs to confine its search to people who would also make a good chairman. And that's just self-defeating.

Wilson says, reasonably enough, that combining the positions of chairman and CEO creates the "Imperial CEO". I would expect to find Imperial CEOs in young companies run by their founder, like Oracle (ORCL) or Whole Foods (WFMI); I'm surprised to find Imperial CEOs mandated in much older companies like GE and Coca-Cola which are many generations removed from their founders.

Wilson would like stock exchanges to require that when a company names a new CEO, it must also name an "independent director" as chairman. I think that companies should do that; I'm not at all sure that it's the role of stock exchanges to force such a thing, however. But put that to one side: companies with bylaws forcing the same person to fill both roles should either abolish those bylaws, or else come up with a good reason for their continued existence. At least give the board the option to split the roles!