Startups Should Merge CEO And Chairman Roles

It’s traditionally believed to be good corporate governance to have different people occupying the CEO and chairman roles within a company, but this is far from ubiquitous, as countries in Scandinavia tend to combine the two roles.

Research from Cambridge Judge Business School suggests that it’s an approach that could work well for tech startups. The study compares the “agency” approach to governance that is common in Anglo-Saxon countries with the “stewardship” approach that dominances in Scandinavia. The former argues that managers need oversight from an independent board, whereas the latter believes that managers can be trusted to do what’s right.

“The more profound the trust between the individual board members and the incumbent CEO, the better the intraboard behavioral integration, and the better, and more efficacious advice they can provide, the more efficacious the venturing initiative is likely to be,” the researchers explain. “The results imply that the ‘one person, two jobs’ situation is positive for new venture development.”

Good relations

The study looks at the impact internal board relationships have on the functioning of a startup and is based on an analysis of high-tech firms in Norway.

It shows that the higher the trust levels between board members, the more effective decision-making is. What’s more, informal communication tends to be of a higher standard, which combines to improve the effectiveness of the team.

“CEO duality will moderate the relationship between intraboard trust and the effectiveness of venturing teams, so when the CEO is also the chairperson, execution is often more effective, and the venturing team will be even more so,” the researchers explain.

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