However, there are potential negatives when co-CEOs are in charge. According to European CEO, “Egos inevitably become inflated when moved into the echelons of upper management – and even when two seasoned and mature executives think they’ve evenly distributed the responsibilities of their shared job, it’s exceedingly difficult for companies to adapt to a divided command structure.”
There is another problem related to reporting because board members are not sure to whom they should be reporting to. Fundamentally, two heads never work over the long-term—just as there are no ‘mergers of equals,’ because in the end the products, services, culture and marketing approach of one company … in the end prevail,” Helmuth Uder, head of board and executive remuneration consulting at Towers Watson, told The Wall Street Journal.
But when it works, there can be lucrative benefits. One instance is at the Chipotle restaurant chain. “By the end of Chipotle’s first year under dual-leadership, earnings had jumped by an incredible 67 percent – and things haven’t slowed down since,” according to European CEO.
To make it work, European CEO recommends, “Communication is key, and clear divisions must be made regarding each person’s workload and responsibilities. Even then, the system is difficult to maintain. After all, shared responsibilities mean shared accountability, therefore, the provision of multiple CEOs can make it difficult for board members to know exactly who should be held liable for mistakes.”
With strategic outcomes in mind, Stephen Ferris, director of the Financial Research Institute at the University of Missouri, said that between 1998 and 2008, 111 publicly traded companies in the US had co-CEOs. These included such well-known firms as Bed, Bath & Beyond and American Eagle Outfitters. Other companies, too, may opt for the co-CEO model in the future, given its ability to protect investor and shareholder interest in the log run, growing value for the company.
The original article first appeared on Inside Counsel
