When Bank of America (BAC) was in deep trouble due to write-offs and possible scandals about payments to employees at Merrill Lynch just before it was acquired by the huge bank, a number of investors called for chairman and CEO Ken Lewis to step down. A more moderate group of shareholders suggest that Lewis give up his job as chairman to another board member and remain as CEO.
The theory that separating the chairman and CEO roles is important to good working practices has been around for decades. It is based on the simple premise that having too much power in the hands of one person at the top of a company makes it harder for the corporate governance process to work. The logic goes further to say that the board of directors should be an independent entity led by a person who is not an employee of the company.