ositions of chairman and CEO are usually combined is that this provides a single focal point for company leadership(Anderson/Anthony) A powerful and effective CEO creates an image of stability and instills a sense of well being to its employees as well as its shareholders, projecting a clear sense of direction. IIINegative aspects of CEO DualityWhen a companys chief executive officer is also the chairperson of its board, directors often have contrary objectives . Boards of directors are charged with ensuring that Chief Executive Officers (CEOs) carry out their duties in a way that serves the best interests of the shareholders. Therefore, the Board of Directors maintains equilibrium between CEO and shareholder interests. Two theories have been put forth to explain why a firm would adopt a dual leadership structure. Fama and Jensen (1983) suggest that the leadership structure of the firm can help control the agency problems created by the separation of residual risk bearing and control typically found in most corporations. More specifically, they believe that the separation of the decision management (initiation and implementation of investment proposals) and decision control (ratification and monitoring of investment proposals) functions within a firm reduces agency costs and leads to enhanced firm performance. At the apex of the leadership structure, this means that the highest-level decision management agent (the CEO) should not control the highest-level decision control structure (the board of directors). As the chairman of the board has the greatest influence over the functioning of the board, Fama and Jensen's theory implies that the effective separation of decision management and decision control requires that the chairman of the board must not also be the CEO of the firm. Further, if Fama and Jensen are correct, firms that switch to a dual leadership structure should experience an improvement in performance following the leadersh...
