Ryals McMullian is both CEO and Chairman of Flowers Foods. We believe that the Board having its own leadership, separate from the CEO, would be an effective way to ensure that it has the opportunity to fully debate all important issues in order to fulfill its oversight responsibilities and hold management accountable for performance. This would also allow the CEO to focus on running the day-to-day business.
In fact, Flowers’ own Corporate Governance Guidelines clearly state: “The role of the Board is to oversee the performance of the chief executive officer (the ‘CEO’) and other senior management of the Company, and to assure that the best interests of shareholders are being served.” [Emphasis added.] “To satisfy this responsibility, directors are expected to take a proactive approach to their duties and to function as active monitors of corporate management.”
As such, we believe the Board can’t truly fulfill its primary role if the CEO whose oversight it’s responsible for is the very same person leading that oversight.
We do recognize that Flowers has an independent Presiding Director, but serious concerns arise about the role.
First, at other major companies, this role is elected annually by the independent directors only. But at Flowers, no such firewall of independence is required for the selection process, as the Corporate Governance Guidelines say it’s the Board (as a whole) which appoints the role.
Further, although Flowers’ 2024 proxy statement says that “[p]ursuant to our corporate governance guidelines, the board of directors established the role of independent presiding director,” it doesn’t appear a Presiding Director is actually mandated in the event of a non-independent Chair, as the Governance Guidelines just state one “may” be appointed?—?not that one must or shall be.
But even if Flowers were to address those issues, concerns about having a non-independent Chair would persist, as vesting a single person with executive and Board leadership simply concentrates too much responsibility and inhibits independent Board oversight on behalf of shareholders.
As Glass Lewis said, “shareholders are better served when the board is led by an independent chair,” as this “leads to a more proactive and effective board of directors.”
Indeed: “The chair of the board should ideally be an independent director,” reports Institutional Shareholder Services (ISS), “to help provide appropriate counterbalance to executive management.”