Raising the Barra
Adding the chairmanship to Mary Barra’s duties at General Motors is the wrong reward for her relatively successful do-over year. GM’s chief executive has boosted margins and steered the Detroit automaker through an ignition-switch recall fiasco that marred her first 12 months running the company. But giving her both roles is bad governance.
The rationale for doing so, according to the maker of Chevrolet pickups and Buick sedans, is that re-combining the positions would help “drive the most efficient execution of our plan and vision for our future.” GM also pointed to the fact it was “consistently delivering on its targets and on track to generate significant value for its shareholders” as evidence it was the “right time” for Barra to take on the chairman role.
GM is performing well. Analysts expect it to report $8 billion of net income for 2015 and pre-tax margins in the third quarter were a record, thanks in large part to booming sales of pickup trucks – usually the biggest money spinner. Barra also deserves credit for handling the ignition-switch mess, using the multibillion-dollar calamity to try to push through changes to how the company operates.
She had help with both, though. U.S. vehicle sales hit a record 17.5 million in 2015, helping most rivals, Ford included, to bumper profit. And the fallout from the ignition-switch fail would have been far worse – financially and perhaps even legally – if GM had not been partially protected by its taxpayer-funded 2009 bankruptcy.
Even so, good earnings and solid crisis management hardly constitute grounds for a dual chairman-CEO. Nor does the prospect of a “time of unprecedented industry change,” as the company statement put it. The point of having two distinct roles is so each can focus on separate tasks – the CEO on running the company, the chairman on managing the CEO and the board and on representing shareholders.
Combining them adds extra duties and leaves even inquisitive boards struggling to hold management to account. Barra may be proving her worth. But the recent history of the car industry in general and GM in particular shows the need for more oversight, not less.