CEO Succession
Definition
A process initiated by the board of directors for ensuring a smooth transition when a CEO leaves the company, regardless of circumstances. This includes ensuring that there is always a short list of appropriate candidates, internal and external, from which to select a successor. Most governanace experts agree that CEO succession is the board's most important responsibility.*
Current Context
- At least 40% percent of top leaders fail in their new positions within the first 18 months*
- Almost half of the corporations with revenue greater than $500 million have no usable succession plan*
- Only 31% of CEOs rated themselves effective in planning for their own succession*
- Following its fiduciary responsibilities, the board’s next most important responsibility is establishing a clear path for CEO transition*
Recommendations
- Ensure a smooth CEO transition, regardless of the conditions under which the former executive left the organization
- Elevate succession planning to a top priority
- Develop a Succession Committee to determine board member responses to tough questions including:
- How satisfied are you really with the current CEO in the areas of performance, reputation (industry, street, management and employees), response to a crisis, and willingness to work in partnership with the board?
- Are there unresolved conflicts within the board that have kept it from addressing CEO succession?
- If the current CEO were to leave, either voluntarily or be forced out, do you have a workable plan in place to guide the organization through the transition? Are you confident of the board’s ability to execute the plan and navigate the transition successfully?
*NACD
*Mercer Delta Consulting and the Center for Effective Organizations |
