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Separating the Roles of Chairman and CEO: A Model of Leadership and Authority

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  • Illoong Kwon

Abstract

This paper provides a simple model of authority and leadership to discuss the issue of splitting the roles of CEO and Chairman. The board has the formal authority, but can delegate the leadership to the CEO by providing the title of chairman to the CEO. The paper shows that the optimal leadership structure differs depending on the board's independence. However, once we endogenize the board's indepence and the CEO's type, there exists a unique equilibrium where the board chooses the maximum independence without splitting the titles. The paper also considers the CEO's possible resistance and the agency problem with the board.

Suggested Citation

  • Illoong Kwon, 2008. "Separating the Roles of Chairman and CEO: A Model of Leadership and Authority," Discussion Papers 08-06, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:08-06
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    File URL: http://www.albany.edu/economics/research/workingp/2008/Leadership.pdf
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    References listed on IDEAS

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