Who is the boss? a comparative analysis of CEO and Chairman power in Brazil and France

Abstract

Most corporate governance papers assume that the CEO function is the main locus of corporate power. This is reasonable in environments characterized by dispersed ownership, where executives tend to be stronger vis-à-vis shareholders and the CEO usually has hierarchical ascendancy over other top managers. However, when CEO and the Chairman of the Board positions are split, especially in environments characterized by concentrated ownership, the de facto role of corporate leader for major decisions may reside in the hands of a founder, family-owner or large shareholder who usually chair the board of directors but may not necessarily hold the CEO title. This paper argues that - for companies with one-tier boards and different persons holding the CEO and Chairman positions - chairmen should be considered as more powerful corporate agents than CEOs in many - if not most - of the occasions. A methodology for comparing the relative power of the chairman vis-à-vis the CEO in order to identify who is most likely to be the de facto corporate leader for major corporate decisions is developed and applied to listed firms in Brazil and France. Since the relevance of the chairman vis-à-vis the CEO has not been addressed in previous theoretical and empirical literature, the results of this research may add a new perspective for analyzing corporate governance in environments characterized by concentrated ownership structures. (AU)