A Contemporary Study of the Relationship between CEO Duality and Organizational Performance - Dissertation Example

This means that the companies which have unity of command, i.e. the same individual is charged with the responsibility of CEO and chairman of the board, perform financially at a lower level. However, these findings and conclusions are representative of the companies operating in Kuwait only, and keeping in view the prominence of family owned and managed companies in Kuwait, the trend of duality is on the larger side. In other countries, this trend may change or there may be no duality at all, and therefore the projection of these findings and conclusion is invalid for such regions.

Board duality is a situation where one individual holds both positions of Chairperson and CEO (Kwok 1998). This is a phenomenon that has been commonly observed in countries with weaker regulatory and accounting frameworks. Various studies have been conducted throughout the world regarding differences in duality within boards of directors and the impact on company performance. Company shareholders have assisted with these studies in order to improve understanding and the relationship between board duality and company performance.

Duality in board structure is relevant to corporate governance, and it includes a wide range of disciplines, such as international affairs, economic laws and political science. Duality in the boards of the listed companies in Kuwait and the performance of these companies has become questionable because of the dual function in leadership. There are many reasons behind this research. However, the foremost purpose of conducting the research is that corporate governance is a relatively new subject in Kuwait and few people are aware of its company laws and legislation.

Another reason is that the issue of duality is not specified in the legislation of corporate governance (Rechner and Dalton 1991). For example, Kuwaiti company law does not specify whether the CEO of the company can also serve as the chairperson. The dual role of CEO/chairperson creates a problem because it can affect the company’s disclosure. A chairperson who is also acting as the CEO has the liberty and power to conceal from shareholders any information that could damage the standing of the firm.

This is a very important issue which has not been addressed before. The aim of this research is to resolve this problem (Al-Sultan and Al-Shammari 2010). A compounding problem is that families run most of the companies in Kuwait. Therefore, it is very difficult to remove dual functioning from these companies, and the dual role of the company’s owner can negatively affect the firm (Omran, Bolbol and Fatheldin 2008). Some studies have shown that a positive relationship exists between duality and its impact on company performance.

Corporate governance