No Chairman under Delaware law

I have seen a number of articles recently talking about splitting the CEO and chairman roles. Here’s one about JPMorgan.

Everyone still seems so up in arms about this issue. I would have thought someone would have done a little digging. Here’s my take:

  1. All directors have equal power and equal responsibilities. There is no rank among them.
  2. The Delaware General Corporation Law subchapter on Directors and Officers, Sections 141-146, DOES NOT have the word chairman, chairperson, or anything with the word “chair” in it. Go search. Click the link, hit CTRL+F, and type “chair” into the search box. I get zilch.
  3. Contrary to my previous belief, there is however a special power or responsibility for a chairperson or vice-chairperson of the board: Section 158 of the GCL says this:

Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson or vice-chairperson of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form.

(Emphasis added.)

Well, now, the chair has the same power as the assistant secretary to sign a stock certificate! That’s something to brag about. I guess there is a difference after all. Of course, nobody clamoring for splitting these roles is thinking about stock certificates. And you can’t really get worked up about them anyhow:

Any or all the signatures on the certificate may be a facsimile.

Well there you go. No one cares if the Chair even really signs your stock certificate.

So what are people really saying when they complain about the same person having the CEO and the Chairman role? They’re saying that the other directors don’t take their duties seriously and are willing to kowtow to the CEO/Chair because of non-existent power allocated to the Chairman role. I can’t think of any other explanation that makes sense. Can you?

Of course, a company can adopt bylaws giving the chair certain powers to call meetings, and run a board meeting. But no director worth her salt is going to let herself be railroaded into breaching her fiduciary duties to the company (and its shareholders) just because someone has to call a meeting to order.

BONUS COMPARATIVE LAW KNOWLEDGE:

Now, the California Corporations Code is different (HT: Keith Paul Bishop). But no one talking about corporate governance of large companies (other than Cisco Systems) is worried about California law. Section 312(a) provides:

A corporation shall have (1) a chairperson of the board, who may be given the title of chair of the board, chairperson of the board, chairman of the board, or chairwoman of the board, or a president or both, (2) a secretary, (3) a chief financial officer, and (4) such other officers with such titles and duties as shall be stated in the bylaws or determined by the board and as may be necessary to enable it to sign instruments and share certificates. The president, or if there is no president the chairperson of the board, is the general manager and chief executive officer of the corporation, unless otherwise provided in the articles or bylaws.

and provides for some duties and powers of the chair that overlap with a typical CEO/President role when there is no president.

NB: updated the language in the quote to the current version on 25-May-2020.

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