Are BODs Doing Appropriate Succession Planning?

News Brief

By Cydney Posner

Apparently not, according to an article in the Washington Post. A recent study shows that only about half the directors surveyed thought their companies had selected a specific successor to be the next CEO. The survey, by Stanford University's Rock Center for Corporate Governance and the Institute for Executive Development, involved interviews with 159 directors from 20 companies. The directors said that they would need "nearly 90 days to replace their CEO if the current one was to leave today—a troubling sign for how out-of-date most succession plans are. Moreover, only 25 percent of respondents said there is an adequate pool of candidates prepared to be CEO within their companies." One commentator viewed the study results as "'pretty disturbing…That's really a board duty. It's one of the key things the board does. If you're not grooming someone, or don't at least know who's on the short list, there's really a gap.'" The results of a related study may have something to do with the results of the first study: when asked how well they know senior executives a rung or two below the CEO, the answer was "not very well." The article reports that "[o]nly seven percent of companies assigned a board member to mentor senior executives below the CEO. Just 23 percent of the directors surveyed said they participated in the performance evaluations of these top managers. And the vast majority (71 percent) said they only visit company offices or work locations without the CEO present "when circumstances warrant," rather than on a regular schedule." But these results can't be attributed just to lack of time or logistics. There may be more delicate factors at play: "what's also a factor is the delicate egos and individual personalities that must be navigated when talking about who will follow a CEO. According to one commentator, "[i]n succession planning, the CEO you're looking to replace many times is sitting right there….It becomes very personal. They think, "Why aren't you looking for someone just like me but younger? "'"

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