CEO Succession

For many boards, CEO succession planning has remained either non-existent or a perfunctory matter of having in mind an internal heir to the top job. But a poor choice of chief executive can have far-reaching effects on a company’s ability to create value; effects that can take years to correct. Making sure that CEO succession does not prove the critical weakness in an otherwise resilient organization calls for an equally resilient succession planning process made up of three essential elements: role specifi­cation, rigorous candidate assessment, and mapping the external talent market.

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 to the General Counsel, on whose desk it belongs, and instead devote their time to the real substance of CEO succession planning.