Boards must keep a closer eye on the top job

A new report says lots of boards are neglecting one of their key responsibilities: succession planning.

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Last Updated: 31 Aug 2010

Nearly two-thirds of public company directors say that their companies have not considered the idea of CEO succession planning in the last six months, according to a Thomson-Reuters survey – including a sizeable proportion who have ignored the issue entirely. The authors argue that public company boards have become so preoccupied with other corporate governance issues (like executive pay and CSR policies) that they’re failing to fulfil one of their most important tasks: to make sure there’s a contingency plan for the corner office....

Governance distractions are not the only barrier to good succession planning, of course - it’s a tricky business at the best of times. If there’s no sign of your head honcho leaving, it’s a bit hard to start recruiting a replacement when you don’t know what kind of company they’ll be inheriting . Two years ago most companies were probably thinking in terms of a safe pair of hands – now they might be more interested in an M&A specialist, or even a turnaround expert.

And even if you can work out who the next boss should be, what do you do with them? It might be hard to sign them up when there’s no sign of the top job becoming available. Plus of course you have the perennial problem that your ideal candidate might actually turn out to be completely hopeless when push finally comes to shove.

On the other hand, none of these are excuses to ignore the issue altogether. After all, you’ll have contingency plans in place for so many aspects of your business – and this is more important than most. The report’s authors argue for a proactive approach to succession planning, with the entire board getting involved in the process: a pool of prospective internal candidates should be maintained at all times, with the option to get recruiters searching for external candidates if there isn’t anyone suitable.

We’re convinced by the argument that succession planning is a crucial part of the board’s role, and we can well believe that it sometimes gets shunted to the bottom of the to-do list. But with the best will in the world, there’s surely only so much you can do in advance given how rapidly the world can change. Directors have a responsibility to shareholders to get the right person at the right time – not the bloke who seemed like the right person four years earlier. And as the recent case of BP showed, having a world-class succession plan isn’t necessarily enough to ensure a seamless transition...


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Boards must keep a closer eye on the top job

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