Do Boards Think and Act Like Organization Theorists? Revisiting the Contingency Model of CEO Duality

Abstract

The contingency model of CEO duality predicts that the benefits of combining the CEO and Board Chair roles will be greatest when environmental uncertainty is high—in environments marked by high dynamism, low munificence, and high complexity. While this model has received empirical support, the question remains as to whether boards of directors actually take the external environment into account when choosing their leadership structure (i.e. whether to combine or separate the CEO and Board Chair roles). We address this question using a sample of S&P 500 firms and find that not only do boards not follow the prescriptions of the contingency model, they actually do the exact opposite of what is prescribed. Our data also show, however, that while boards may not act like organization theorists, they sometimes think like them. We discuss the implications of these findings for both organization theory and for corporate governance practice.