It is hereby proposed that the positions of Chairman of the Board of Directors and Chief Executive Officer not be held by the same person.
At the head of the list of the premises of corporate governance is the separation of powers between the chairman of the board of directors and the CEO so as to ensure the independence of the board of directors. One of the primary roles of the board of directors is to oversee management. The combining of these positions is a source of conflict of interest and a concentration of power in the hands of one individual. Too much power is fatal to prudent management. 80% of the companies which make up the TSE index have separated these positions. The vast majority of institutional investors in Canada recommend the separation of powers. This principle was proposed by both the Royal Bank and the Bank of Montreal during negotiation of their unsuccessful merger.
A Toronto Stock Exchange report (1994) recognises the merit of the separation of powers: “We express our preference for the nomination of a president who is not chairman of the board. The board of directors should function completely independently from management. In applying this guideline the board of directors should designate a powerful president who is not the chairman of the board and whose mandate is to manage the board of directors.”