Board Consulting

In an October 2009 release, the United States Securities and Exchange Commission effectively removed the ordinary business exclusion defense used by companies reluctant to disclose their CEO succession process to shareholders. The policy change allows for a new wave of corporate governance scrutiny, as regulators and shareholders increasingly focus on CEO succession practices. Companies and boards would do well to prepare, write Justus O'Brien, a consultant at Egon Zehnder International, New York, and shareholder relations expert Edward Ferris in an article published in The Conference Board.

Much ink has been spilled on what the legal bulletin issued by the SEC’s Division of Corporation Finance on October 27, 2009, might mean for boards of directors. Now that companies will no longer be able to exclude from proxy statements shareholder proposals calling for a disclosure of the board’s succession planning process, boards have been inundated with advice about compliance. The truth is that no one knows exactly how it might play out — the bulletin doesn’t specify how much would need to be disclosed or set standards for the succession planning process itself. Directors would be well advised to simply pass it on the General Counsel, on whose desk it belongs, and instead devote their time to the real substance of CEO succession planning.