- Goldman Sachs, BlackRock and Bank of America face similar shareholder proposals this year.
- Some investors like to split the roles of CEO and chairman so that no one person has all the power.
- Even if these proposals are successful, researchers are skeptical that separating jobs will make companies better.
Three of Wall Street's top executives are facing investor turmoil over their jobs this spring.
Investors from Goldman Sachs, BlackRock and Bank of America announced that they would replace the CEO and chairman roles held by David Solomon, Larry Fink and Brian Moynihan, respectively, in shareholder proposals this year. I'm proposing to split it up. Efforts to add more independent oversight to corporate boards amount to public rebuke of CEOs.
Proxy voting advisors (firms that recommend how major shareholders vote) typically want different people to fill the roles of CEO and board chairman to reduce the appearance of conflicts of interest. Last week, leading proxy voting firms Glass Lewis and Institutional Shareholder Services recommended that Goldman and BofA separate the roles of CEO and chairman. A British activist fund is pushing something similar at BlackRock, the world's largest asset manager.
Goldman, BlackRock and BofA urged investors to vote against the change in their annual meeting documents.
A cyclical history of dividing the roles of CEO and chairman
These proposals have come and gone, with many similar voting questions asked by shareholders large and small on Wall Street. Most of them were rejected or led to short-term changes.
For example, BofA separated the CEO and chairman roles in 2009 under shareholder pressure, but reintegrated Mr. Moynihan's duties five years later. The bank is once again facing a shareholder proposal to separate Mr. Moynihan's role, a rehash of a similar vote that failed in 2015.
Last year, nearly 14% of S&P 500 companies received shareholder proposals to separate the CEO and chair roles, up from 6% in 2021, according to data provider ISS-Corporate. On average, these proposals receive about 30% support. BlackRock supported such a proposal in Exxon in 2020, but the measure failed.
Over the past few decades, American companies have increasingly separated jobs. However, researchers at the Stanford Graduate School of Management wrote in a 2016 paper that division of roles is “not clearly beneficial” to a company's performance.
Researchers at Stanford University tracked board changes at the 100 largest and 100 smaller publicly traded companies over a 20-year period ending in 2016. They found that one-third of companies, including BofA, separated the chairman and CEO roles and later merged them in 2016. A period of 20 years.
Large companies, such as today's Big Three Wall Street firms, were much more frequently targeted by shareholder proposals than smaller companies. Over 20 years, 56 of the 92 largest companies faced at least one shareholder proposal to add an independent chair. Out of 95 small businesses, only three of his companies did so.
“This means that the companies that shareholders target to assert independent board leadership are not necessarily the ones with the most egregious governance problems, but the ones that are the most visible and public targets. “This suggests that this may be the case,” the Stanford University researchers wrote.
