Reexamining CEO duality: The surprisingly problematic issues of conceptualization and measurement

• Author: Santiago Mingo,Marc Junkunc,Steve Gove,Olga Bruyaka,Luiz Ricardo Kabbach de Castro,Yue Song,Pooja Thakur Wernz,Martin Larraza‐Kintana
• DOI: http://doi.org/10.1111/corg.12190
• Date: 01 November 2017
• Published date: 01 November 2017

SPECIAL ISSUE ARTICLE

Reexamining CEO duality: The surprisingly problematic issues

of conceptualization and measurement

Steve Gove

1

|Marc Junkunc

2

|Olga Bruyaka

3

|Luiz Ricardo Kabbach de Castro

4

|

Martin Larraza‐Kintana

5

|Santiago Mingo

6

|Yue Song

2

|Pooja Thakur Wernz

2

1

University of Vermont, Burlington, Vermont,

USA

2

Virginia Tech, Blacksburg, Virginia, USA

3

West Virginia University, Morgantown, West

Virginia, USA

4

Universidade de São Paulo, São Paulo, Brazil

5

Institute for Advanced Research in Business

and Economics ‐INARBE, Universidad Pública

de Navarra, Pamplona, Spain

6

Universidad Adolfo Ibáñez, Santiago, Chile

Correspondence

Steve Gove, University of Vermont,

Burlington, Vermont, USA.

Email: steven.gove@uvm.edu

Funding information

Spanish Ministry of Economy and Competi-

tiveness, Grant/Award Number: ECO2013‐

48496‐C4‐2‐R.

Abstract

Manuscript Type: Empirical

Research Question/Issue: While corporate governance research is the beneficiary of

advances in research methodologies and statistical techniques, less attention has been placed

on variable measurement. This paper draws into question the conceptualization and measure-

ment of CEO duality by highlighting its largely unrecognized instability and the challenges insta-

bility imposes on measuring dichotomous variables. CEO duality is widely used in corporate

governance research and frequently operationalized dichotomously as a dummy variable. We

present examples of the frequent changes in duality within organizations which challenge our

current view of CEO duality.

Research Findings/Insights: We find that the instability of CEO duality in practice varies

considerably at both the national and within‐firm levels. We find that a mismatch exists between

the current conceptualization of CEO duality, actual patterns of data, and the measures used by

governance researchers. The paper draws attention to the limits of conceptualizing and measur-

ing what is seemingly dichotomous data, reviews these in research and in practice, and provides

examples, recommendations and assessments of alternate ways existing data can be used.

Theoretical/Academic Implications: Our results draw into question the reliance on a sim-

ple dichotomous conceptualization and operationalization of CEO duality in governance research.

Data limitations of corporate governance research may be alleviated by directly assessing stability

of duality within firms and reimagining concepts in ways that can be measured using existing data.

Practitioner/Policy Implications: CEO duality, a legal but discouraged governance struc-

ture, may be changed intentionally or result from a variety of temporary firm‐level factors.

Assessing the longitudinal patterns in duality and underlying causes for temporary changes in

duality should be incorporated into evaluations of firm governance structures.

KEYWORDS

Corporate Governance, CEO Duality, construct measurement,dichotomous variable, dummy

variable

1|INTRODUCTION

CEO duality, defined as a firm allowing the CEO and board chair posi-

tions to be combined, is among the most widely used concepts and

variables in corporate governance research (Dalton & Dalton, 2011;

Krause, Semadeni, & Cannella, 2014). Among directors and stock ana-

lysts, CEO duality is considered the most important governance attri-

bute (Adrian, Wright, & Kilgore, 2016). There has long existed calls

among oversight groups for the separation of the CEO and board chair

roles within firms (e.g., CalPERS, 2011), a call for non‐duality. Yet,

empirical research evidence for statistical relationships involving CEO

[Correction added on 5 April 2017, after first online publication: Affiliation for

author Martin Larraza‐Kintana has been amended in this current version.]

Received: 26 March 2015 Revised: 30 October 2016 Accepted: 31 October 2016

DOI: 10.1111/corg.12190

Corp Govern Int Rev. 2017;25:411–427. © 2016 John Wiley & Sons Ltdwileyonlinelibrary.com/journal/corg 411

TABLE 1 Illustration of duality patterns identified

Panel A: Intel –Stable Non‐Duality; with CEO Change

Year CEO Board Chair Duality or Non‐Duality? Duality Change from Prior Year?

2002 C. R. Barrett A. S. Grove Non‐Duality

2003 C. R. Barrett A. S. Grove Non‐Duality No change

2004 C. R. Barrett A. S. Grove Non‐Duality No change

2005 C. R. Barrett A. S. Grove Non‐Duality No change

2006 P. S. Otellini C. R. Barrett Non‐Duality No change

2007 P. S. Otellini C. R. Barrett Non‐Duality No change

2008 P. S. Otellini C. R. Barrett Non‐Duality No change

2009 P. S. Otellini C. R. Barrett Non‐Duality No change

2010 P. S. Otellini J. E. Shaw Non‐Duality No change

2011 P. S. Otellini J. E. Shaw Non‐Duality No change

2012 P. S. Otellini J. E. Shaw Non‐Duality No change

Duality / Non‐Duality Ratio: 0:11 Total # Of Duality Changes: 0

Panel B: Alcoa –Duality with Succession Event(s):

Year CEO Board Chair Duality or Non‐Duality? Duality Change from Prior Year?

2002 A. J. P. Belda A. J. P. Belda Duality

2003 A. J. P. Belda A. J. P. Belda Duality No change

2004 A. J. P. Belda A. J. P. Belda Duality No change

2005 A. J. P. Belda A. J. P. Belda Duality No change

2006 A. J. P. Belda A. J. P. Belda Duality No change

2007 A. J. P. Belda A. J. P. Belda Duality No change

2008 K. Kleinfeld A. J. P. Belda Non‐Duality Change in Duality

2009 K. Kleinfeld A. J. P. Belda Non‐Duality No change

2010 K. Kleinfeld A. J. P. Belda Non‐Duality No change

2011 K. Kleinfeld K. Kleinfeld Duality Change in Duality

2012 K. Kleinfeld K. Kleinfeld Duality No change

Duality / Non‐Duality Ratio: 8:3 Total # Of Duality Changes: 2

Panel C: Hewlett‐Packard –Cannot classify; Multiple Events

Year CEO Board Chair Duality or Non‐Duality? DualityChange from Prior Year?

2002 C. S. Fiorina C. S. Fiorina Duality

2003 C. S. Fiorina C. S. Fiorina Duality No change

2004 C. S. Fiorina C. S. Fiorina Duality No change

2005 R. P. Wayman P. C. Dunn Non‐Duality Change in Duality

2006 M. V. Hurd P. C. Dunn Non‐Duality Nochange

2007 M. V. Hurd M. V. Hurd Duality Changein Duality

2008 M. V. Hurd M. V. Hurd Duality No change

2009 M. V. Hurd M. V. Hurd Duality No change

2010 M. V. Hurd M. V. Hurd Duality No change

2011 L. Apotheker R.J. Lane Non‐Duality Change in Duality

2012 M. C. Whitman R. J. Lane Non‐Duality No change

Duality / Non‐Duality Ratio: 7:4 Total # Of Duality Changes: 3

Panel D: Caterpillar –Stable Duality; with CEO Change

Year CEO Board Chair Duality or Non‐Duality? Duality Change from Prior Year?

2002 G. A. Barton G. A. Barton Duality

2003 G. A. Barton G. A. Barton Duality No change

2004 J. W. Owens J. W. Owens Duality No change

2005 J. W. Owens J. W. Owens Duality No change

2006 J. W. Owens J. W. Owens Duality No change

2007 J. W. Owens J. W. Owens Duality No change

2008 J. W. Owens J. W. Owens Duality No change

2009 J. W. Owens J. W. Owens Duality No change

2010 J. W. Owens J. W. Owens Duality No change

(Continues)

412 GOVE ET AL.