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

  • Illoong Kwon

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.

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File URL: http://www.albany.edu/economics/research/workingp/2008/Leadership.pdf
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Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 08-06.

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Date of creation: 2008
Date of revision:
Handle: RePEc:nya:albaec:08-06
Contact details of provider: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

Order Information: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Web: http://www.albany.edu/economics/research/workingp/index.shtml Email:


References listed on IDEAS
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  1. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Eric van Damme & Sjaak Hurkens, 2001. "Endogenous price leadership," Economics Working Papers 581, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Brickley, James A. & Coles, Jeffrey L. & Jarrell, Gregg, 1997. "Leadership structure: Separating the CEO and Chairman of the Board," Journal of Corporate Finance, Elsevier, vol. 3(3), pages 189-220, June.
  4. Giovanni Maggi, 1996. "Endogenous Leadership in a New Market," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 641-659, Winter.
  5. repec:ner:tilbur:urn:nbn:nl:ui:12-129320 is not listed on IDEAS
  6. Pi, Lynn & Timme, Stephen G., 1993. "Corporate control and bank efficiency," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 515-530, April.
  7. Benjamin E. Hermalin & Michael S. Weisbach, 1996. "Endogenously Chosen Boards of Directors and Their Monitoring of the CEO," Microeconomics 9602001, EconWPA, revised 09 Oct 1996.
  8. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
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