ip structure change. Other authors, however, found that separating the chair and CEO positions led to improved firm performance. Rechner and Dalton (1991) used three accounting measures of profitability to investigate the performance of a sample of Fortune 500 firms that maintained the same leadership structure from 1978 through 1983. These authors found that firms with a dual leadership structure consistently outperformed firms with a unitary leadership structure. Pi and Timme (1993) found some evidence that banks with a dual leadership structure were more profitable and were more cost efficient than firms with a unitary leadership structure. Agency theorists view the board of directors as a type of checks and balances system, similar to that of our government. Agency theorists are typically opposed to CEO duality, whereas organizational theorists offer more support. It has been reported that a vigilant and conscientious board is made up of independent outside directors, otherwise unaffiliated with the company other than that they hold large sums of that companys stock. Outside directors are more vigilant than directors with other firm affiliations because (1) they focus on financial performance, which is a central component of monitoring. (2) They are more likely than insiders to dismiss CEOs following poor performance, and (3) protecting their personal reputations as directors gives them incentive to monitor. Although insiders tend to have more detailed information about firm operations, they are likely to be reluctant to confront a CEO in a boardroom situation. Several authors have suggested that CEOs may use their leadership position on the board to dictate the agenda of the board meetings and minimize dissent. Traditional agency and legal perspectives on corporate boards generally do not address how top managers respond to the threat of greater board monitoring and control over their decision making. But losing structural sources ...
