Corporate governance experts agree that separating a company’s chair and CEO roles is a best practice and that the chair should be a director who meets the legal definition of independence; shareholder resolutions on the topic have been among the most popular corporate governance related resolutions in recent years. Equilar research firm reports that, as of 2019, 87 percent of the largest 500 companies studied separate these roles, which is standard for European companies. Yet all U.S. pharmaceutical companies combine the roles.
Members of the Investors for Opioid and Pharmaceutical Accountability (IOPA), which Mercy Investment Services co-founded, filed an independent chair proposal at five U.S. pharmaceutical companies: AbbVie, Bristol Myers Squibb, Eli Lilly, Gilead Sciences, and Johnson & Johnson. Even when the resolutions received more than 40 percent of support in consecutive years, the companies continue to argue that the U.S. pharmaceutical business is too complex for an independent chair.
High vote support demonstrates shareholders’ belief that strong governance improves performance and helps address pharma quality and pricing issues while mitigating other risks. Mercy Investment Services will continue to advocate for separating the CEO and chair roles to strengthen oversight practices.