IBM veteran Arvind Krishna, who was appointed CEO of the company early last year, took on the additional role of chairman in December. Prem Watsa of Fairfax Financial Services also holds both positions, as does Shantanu Narayen of Adobe, and Nikesh Arora of Palo Alto Networks. Mastercard’s Ajay Banga is executive chairman, which gives him an operational role too.
There are different views on whether the same person should hold both roles. Vijay Govindarajan, Coxe Distinguished professor, Tuck School of Business at Dartmouth & executive fellow, Harvard Business School, said usually the chairman of the board in public corporations is separate from the CEO so that the Board can act on behalf of shareholders to ensure corporate governance. But Microsoft, he says, is still a high growth company and the CEO compensation is mostly in Microsoft stock options whose value depends on realising Microsoft’s future growth, thereby aligning the CEO’s interest with those of shareholders. “Ultimately, the issue boils down to the quality of the leader. Satya Nadella is a wise leader, so elevating him to the chairman’s role will serve Microsoft shareholders well,” he said.
However, Nirmalya Kumar, Lee Kong Chian professor of marketing at Singapore Management University and Distinguished Fellow at INSEAD Emerging Markets Institute, believes combining the roles is a bad idea. “The inherent conflict of interest in combining roles is well-known because then the chairman is voting on his/her own compensation and the role of the Board in monitoring the management is diluted, if not compromised,” he said. A powerful chairman, he said, acts as a check on the CEO and a healthy tension between them leads to more thoughtful decisions.
