This week, Goldman Sachs Group Inc. named James J. Schiro to be independent lead director in response to shareholder calls to split the roles of chairman and CEO. Schiro, who has been a member of the board since 2009 and chaired the audit committee, effectively replaces John H. Bryan. Bryan had served as presiding director and will not seek re-election. The difference between lead and presiding directors can be substantial, as lead directors have greater influence over the governance of the board.
The prevalence of independent lead directors has increased in recent years. According to the 2011 NACD Public Company Governance Survey, 65 percent of public companies have an independent lead director, which is the highest rate since NACD began surveying the director community on this question in 1995. Additionally, 88 percent of companies with lead directors said that the position enhanced the board’s effectiveness.
Increased boardroom independence has been in the spotlight recently—for investors and legislators. In 2011, there were 24 shareholder proposals for establishing an independent board chairman (data collected from Jan. 1, 2011 to Jun. 21, 2011). Additionally, shareholders offered up 39 proposals in both 2010 and 2009. In 2010, the Dodd-Frank Act implemented a mandate requiring companies to disclose the rationale behind their current leadership structure—whether the chairman/CEO positions are combined or separated.
The role of the independent lead director has also grown in importance. In 2011, the Report of the NACD Blue Ribbon Commission on the Effective Lead Director found that “the lead director has the ability to give the board a competitive advantage.” The Blue Ribbon Commission identified several areas enhanced by lead directors, including: identifying emerging issues and ensuring they are addressed; maximizing board effectiveness; fostering complete board discussion; and providing leadership in times of crisis.
Regardless of leadership structure, an independent voice leading the work of the board enhances any company. Goldman Chairman and CEO Lloyd Blankfein echoed this sentiment, stating, “I know our people and our shareholders will benefit greatly from [Schiro’s] deep experience in his new role on our board.”