Corporate governance can be defined as a system of processes, practices, and rules through which companies are directed and controlled. It entails balancing the interests of different stakeholders in an organizations including, among others, financiers, customers, suppliers, the management, shareholders, and the government (Anand 2008). Corporate governance enables companies to develop frameworks integral to attaining their objectives. It encompasses almost every sphere of management ranging from internal controls and action plans to corporate disclosure and performance measurement. This is a system imperative to the success of companies in the contemporary world. The board of directors plays an essential role in the achievement of corporate governance goals and objectives. It elects both the chief executive officer (CEO) and the general managers (Kota & Bindu Tomar 2010). It is also within their mandate to ensure the development of business strategies and assess the overall direction of their organization (Wood & Demirbag 2012). The CEO and the general manager are charged with hiring other employees of the company in question. Equally, they oversee the day to day running of the business. Normally, conflicts of interest arise when directors meddle in the day to day running of a corporation. In general, the board provides direction for a company. Particularly, they provide goals, vision of the firm. In the same regard, the board establishes policy based governance systems. It also has a fiduciary duty to ensure the protection of their organization, that is, members’ investments and assets. Ultimately, the board is charged with the monitoring and protection of their organization (Donaldson & Davis 2001).

A number of corporate governance leadership structures theories have been developed. For one, there is the agency theory. This is a theory that tries to explain the relationship between agents and principals in business (Ishaya 2015). It is concerned with conflicts or problems associated with such a relationships, that is, between agents (such, company executives and their principals (for example, shareholders). In line with the theory, agents have the tendency to be driven by their self-interests. As such, they act in ways that serve their desires as opposed to addressing the needs of their principals. In the end, this creates an agency problem (Mallin 2007). The agency theory tries to resolve such conflicts. Basically, agency problems arise when the goals or desires of the principal or agents are in conflict and the principal is finding challenges to verify the same. The issues can also arise when the agent and the principal have dissimilar attitudes towards risks. Different risk tolerances can result into agents and principals being inclined to conflicting actions (Tu, Thanh Son, & Hong Khanh 2014).
Agency theory

Consistent with the agency theory, it is essential for an organization to ensure the separation of the CEO and chairman’s roles in corporate governance leadership. Principally, the theory supports non-duality practices. Proponents of this theory argue that a company’s CEO should not be allowed to handle the role of Chairman as this contributes to agency problems. As a result, organizational performances are impacted upon negatively. It is through the separation that good performances and leadership are guaranteed (Tu, Thanh Son & Hong Khanh 2014).
Stewardship theory

The stewardship theory contradicts the suppositions of the agency theory. Essentially, it is of the view that managers or company executives, left alone, will certainly act as responsible stewards of an organization’s assets in their control (Monks & Minow 2011). Generally, it is against the belief that managers seek to satisfy their needs at the expense of their employers or shareholders. It provides frameworks and mechanisms through which agency problems or issues can be reduced. For example, such challenges can be resolved through tying executive compensation and increasing the benefits they receive from their company (Kota & Bindu Tomar 2010). Managers can also be rewarded financially or by offering them shares. This is done to motivate them to ensure the protection of their shareholders’ assets and interests. Equally, the performance of the company is improved; hence better profitability (Ishaya 2015).

The stewardship theory supports duality. Its proponents emphasize the importance of a company’s CEO assuming the responsibilities of the chairman on the board. The fact that executives act in ways that serve the desires of their employers, means that agency issues will not arise even when an executive is holding different positions. Organizations’ CEO have a more understanding of their organization and how it functions. As such, they are in a better position to lead the board as opposed to an external party (Bozec & Bozec 2007).

Different corporate leadership structures; In particular, there are those that are in support of duality practices while others are opposed to the same.
Non-Duality Structure

The agency theory asserts the main goal of an organization to monitor and protect shareholders’ interests. With this being the case, when one individual holds more than one position, this makes it hard for the board to monitor the effectiveness of the top management. This leads to a situation that favors, hence their ability to engage in acts that serve self-desires (Donaldson & Davis 2001). Basically, the CEO will justify their actions to the board. The board is also rendered powerless. Consequently, this leads to conflict of interests. Non-duality structures help in reducing such problems. Normally, conflicts of interests have a negative impact on a company’s performances. For instance, they can lead to top managers misusing company assets. Return on investment is reduced. In the same breadth, the company in question loses its competitive edge (Chizema 2011).

As argued by Donaldson and Davis (2001), CEOs that execute both the responsibilities and the roles of the chairman of the board are very powerful. As such, the risk of them engaging in actions that are self-seeking is increased. For instance, such an individual is less likely to embrace actions that maximize shareholders value. Duality structures make it problematic for the board to ensure the CEO remains in check at all times as power is concentrated on one individual. The CEO can easily use their position to get out of any trouble they may find themselves in. Bozec and Bozec (2007) argue that the companies ought to embrace non-duality structures to control the powers of the CEO. This is essential in ensuring improved performances. The board’s ability to monitor the actions of top managers leads to executives embracing strategies and activities that maximize shareholder’s value (Young 2006).

Plessis, Hargovan and Bagaric (2010) argue that since directors are not directly allied to the management of the firm, they are stricter when handling their roles and duties. For example, they will ensure that company goals and objectives are accomplished without failure. The issue of conflict of interest does not arise (Kota & Bindu Tomar 2010). Their vast experiences come in handy when making decisions associated with the direction of a company’s need to take to achieve its vision. They also monitor the decisions made by top managers. Improved decision making means improved performances. In the end, a firm achieves an edge over its competitors (Donaldson & Davis 2001).

As postulated by Wood and Demirbag (2012), separate leadership results into improved financial reporting practices, thus audit scope. As a consequent, this reduces audit fees incurred by an organization. The board’s monitoring process has a major impact on annual reports provided by an organization. Poorly performing companies benefit a lot from having separate leadership. They avoid defrauding tendencies considering many struggling businesses will do almost anything to ensure their continued survival in the market (Tricker 2012).

Similarly, the board finds it challenging to oversee and monitor the management when the CEO is also the Chairman of the board. Essentially, their ability to execute this mandate is reduced as a result of absence of independence as well as conflict of interest (Hopt 2005). Ultimately, it is hard to monitor the monitor. The chairman of the board normally controls information flow (Tu, Thanh Son, & Hong Khanh 2014). Duality structure gives CEOs the power to control information flow. They can use their advantage to avoid giving incriminating information. The board works with what it has been provided. Lack of adequate information makes it hard for them to make informed decisions on the way forward. The capability to influence improvement in company performances and productivity is also affected (Tricker 2012).

It is clear that one of the roles played by the board is protecting the interests of stockholders. Accomplishing this task becomes hard with duality structures. There is always the risk that they will be turned into puppets. Fundamentally, an individual who is both the CEO and Chairman has the power to control the board and its decisions. Hiring an independent individual to lead the board helps in dealing with this problem (Chizema 2011).

According to Sturm (2009), external directors have a reputation for their ability to set personal and business relationships, recommend, and reveal that an organization is performing to its optimal capacity. A CEO who is also the chairman of the board has the ability to appoint directors. This means that he or she can easily hire individuals who will support his/her decisions or judgments (Donaldson & Davis 2001). Directors lack the independence required to make informed decisions. It is hard for them to ensure the development of good relationships when their judgments have to be in line with the expectations of the CEO. Company performance is reduced as directors will remain committed to serving the interests of their leader. Such individuals are expected to remain impartial in their thinking and actions. Any form of favoritism leads to low productivity (Tu, Thanh Son, & Hong Khanh 2014).
Duality Structure

Research has shown that there are scholars who are in support of duality structures. Duality structure is associated with the CEO executing the roles of the chairman of the board. Basically, an individual serves as both the company’s CEO and chairman (Donaldson & Davis 2001). As argued by Solomon (2007), duality leads to increased organization effectiveness, hence improved performances. Basically, duality leads to clear cut leadership. This helps in the removal of any ambiguity in regards to responsibility and accountability. This comes in handy in situations where a company is faced with challenging situations that require quick actions failure to which a business losses its edge in the market (Ishaya 2015). This is an argument that has been disputed by other researchers and scholars. However, the fact remains that first decisions are made when one individual is both the CEO and the chairman. The issue of consultation which consumes more time is eliminated (Donaldson & Davis 2001).

Nurdin (2008) argues that company CEO has vast knowledge and skills integral to effectively execute roles and duties associated with the chairmanship of the board. For example, they have experiences on the past performances of their organization and how to improve on the same. This is unlike the case with an external director who may not fully understand the company’s strengths and weaknesses (Wood & Demirbag 2012). As such, it becomes challenging for them to make decisions that will be beneficial to the form. For instance, an external director may argue for a certain move or strategy with hopes that this is what the business needs to ensure its continued success. Nevertheless, in the end, he or she may realize they made the wrong decision. Quite the reverse, company CEOs avoids such mistakes as they have worked for the company and understand what must be done to achieve an edge (Mallin 2007).

CEO duality is also believed to result into higher shareholder returns. According to the stewardship theory, company managers are more than willing to engage in actions that serve the interests of their shareholders (Mallin 2007). The issue of conflict of interest does not arise as individuals are not driven by self-interests. The fact that managers are more knowledgeable in relation to what the company stands for means that they are in a better position to ensure its competitiveness. This means that non-duality structures lead to low shareholder returns (Donaldson & Davis 2001).
Studies Supporting Neither

There are many studies supporting neither the duality nor non-duality structures. Anand (2008) debates that corporate governance only increases rules and regulations managers have to adhere to when dealing with their duties. As such, this makes it hard for them to make decisions that serve their interests of their shareholders in a timely manner. Anand (2008), disputes this supposition citing the positive effects of corporate governance. Companies that fail to ensure effective corporate governance practices risk engaging in illegal acts that will have a negative impact on their reputation. Many businesses have failed or exited the market as a result of ineffective corporate governance practices (Donaldson & Davis 2001).

As stated by Anand (2008), corporate leadership structures vary from one country to another. There are countries where duality structures are common whereas others prefer non-duality structures. The United States is one of the countries where duality structures are widely applied. Large and well established companies in the country prefer duality to other leadership structures (Sturm 2009). Individuals in the country are accustomed to speedy decision making. Normally, they associate non-duality with slow decision making. This explains the reasons as to why companies prefer having a CEO who is also the chairman. On the other, duality practices are less common in other countries such as Australia. People in this countries work under the assumption that non-duality reduces the risk of the CEO misusing their position for their self-interests (Ishaya 2015).

Differences in leadership structures also arise a result of business ownership. Countries with large number of businesses that are family-owned prefer duality structures. In most cases, the founder of the business holds the position of both the chairman and the CEO. The main argument is that such an individual stands to lose a lot as a result of their company failing to achieve its goals and objectives (Donaldson & Davis 2001). As such, they do everything in their power to ensure its success. They are also in a better position to make decisions that serve the interests of shareholders as compared to external directors. Companies managed or headed by other people other than the founder and their lineage prefer non-duality. Separating power ensures no one individual can influence all the decision made by the organization. Occasionally, family owned businesses also embrace non-duality structures especially when the CEO lacks adequate skills to carryout roles and duties associated with both positions (Monks & Minow 2011).

Undeniably, corporate governance contributes to the success of companies and organizations. It involves systems of processes, practices, and rules through which companies are directed and controlled. It also necessitates balancing the interests of different stakeholders in an organizations including, among others, financiers, customers, suppliers, the management, shareholders, and the government. Failure by a company to ensure the same can place it at a disadvantage competition wise. Different theoretical perspectives explain corporate governance including the agency theory and stewardship theory. The agency theory seeks to handle conflicts that arise as a result of an agency relationship. The stewardship theory states that managers act as good agents to their principals even with minimal supervision. Duality and non-duality structures are common forms of corporate governance leadership structures. There are scholars who have argued for duality while others are attracted to non-duality structures. Many researchers argue for non-duality citing the benefits linked with the same over duality structures. As such, it is essential for organizations to consider applying non-duality structures.

Anand, S (2008) Essentials of corporate governance, John Wiley & Sons, Hoboken, NJ.

Bozec, Y & Bozec, R.(2007) “Ownership Concentration and Corporate Governance Practices: Substitution or Expropriation Effects?” Canadian Journal of Administrative Sciences, vol. 24, no. 3, pp. 120-167.

Chizema, A (2011) “The Influence of Ownership Structure on the Implementation of National Codes of Corporate Governance: Development of Research Propositions,” International Journal of Management, vol. 28, no. 4, pp. 290-318.

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Hopt, K. J. (2005) Corporate Governance in context : corporations, states, and markets in Europe, Japan, and the US, Oxford Univ. Press, Oxford.

Ishaya, I V (2015) “Leadership structure: Duality versus Non-duality,” European Journal of Social Science Review, vol. 1, no. 2, pp. 11-17.

Kota, H & Bindu Tomar, S (2010) “Corporate Governance Practices in Indian Firms,” Journal of Management and Organization, vol. 16, no. 2, pp. 289-302.

Mallin, C A (2007) Corporate governance, Oxford Univ. Press, Oxford.

Monks, R A & Minow, N (2011) Corporate governance, Chichester, Wiley.

Nurdin, G (2008) International business control, reporting and corporate governance : global business best practice across cultures, countries and organisations, CIMA, Oxford.

Plessis, J J Hargovan, A & Bagaric, M (2010) Principles of Contemporary Corporate Governance, Cambridge University Press, Cambridge .

Solomon, J (2007) Corporate governance and accountability, Chichester, Wiley.

Sturm, S (2009) The Influence of Institutional Investors on Corporate Management and Corporate Governance in Germany A Multi Perspective Analysis, GRIN Verlag, Mu?nchen.

Tricker, R I (2012) Corporate governance : principles, policies and practices, Oxford University Press, Oxford.

Tu, T T Thanh Son, N & Hong Khanh, P B (2014) “Testing the Relationship between Corporate Governance and Bank Performance – an Empirical Study on Vietnamese Banks,” Asian Social Science, vol. 10, no. 4, pp. 182-214.

Wood, G & Demirbag, M (2012) Handbook of institutional approaches to international business, Edward Elgar, Cheltenham .

Young, A (2006) “Principles of Contemporary Corporate Governance,” Journal of Management and Organization, vol. 12, no. 3, pp. 1032-1069.
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