November 24, 2014
By David F. Larcker, Stephen A. Miles, and Brian Tayan, Stanford University
The shareholders of public corporations have considerable interest in the choice of individual to serve as CEO of their company. They want to be assured that the company has a viable plan in place to replace the current CEO if necessary, either because an emergency arises or in the event of a scheduled transition. A viable succession plan includes knowing that potential candidates have been thoroughly vetted in terms of their strategic vision, operating skill, leadership, and cultural fit with the organization.
Indeed, a 2013 survey by PricewaterhouseCoopers finds that shareholders rank CEO succession planning among the most important issues facing boards of directors, along with strategy, risk management, and executive compensation. Eighty-six percent of respondents consider CEO succession “the most important” or a “very important” issue for the board.
September 19, 2014
By Michael W. Peregrine, McDermott Will & Emery LLP and William F. Kanzer, Kanzer Associates, Inc.
Recent marketplace developments serve to encourage governing boards to establish an emergency CEO successor contingency process as part of risk management protocols. Such a process would be in addition to the board’s traditional obligation concerning succession planning. Unexpected “lightning strikes” relating to CEO security are increasingly within the realm of possibility. They can create havoc for the organization, its brand and its constituents if not properly anticipated.
Certainly, the development of an emergency succession plan requires substantial governance effort, is a distraction from the established board agenda and may lead to significant discomfort in the executive suite. Given what is at stake, however, these disadvantages are more than offset by the ultimate organizational benefits of establishing such a plan.
September 19, 2014
By Ted Dysart, Vice Chairman, Heidrick & Struggles
After Illinois Tool Work’s CEO David Speer lost his battle with cancer earlier this month not only did the Chicago community lose a vital member, but ITW also found itself at a critical leadership juncture. At a time when many companies waste crucial money and resources scrambling for a replacement – and in the process become press fodder – ITW had a plan.
Over his 30+ year career with ITW, Speer left a lasting impression. After joining in 1978, he advanced through sales and marketing positions before becoming CEO in 2005 and, the following year added the title of Chairman. Speer championed and led a strong acquisition program that, before the 2008 downturn, led to $1 billion in increased revenue each year.
September 19, 2014
By Keith Meyer and Morten Nielsen, CTPartners
While it often goes unrecognized, the quality of work done by the board of directors’ search committee can make or break the success of any CEO transition. A competent and effective search committee is a strong asset in attracting top CEO talent to the organization. Conversely, an unprepared or disorganized search committee has the potential to undermine the process.
When addressing a matter as critical as a CEO transition, the search committee can’t be expected to operate in lieu of a retained executive search consultant, but the committee will serve as a valuable ally to the consultant. Boards, therefore, should be well versed in the best practices for establishing and utilizing a CEO search committee.
September 17, 2014
From the WomenCorporateDirectors Global Nominating Commission
Answering calls for specific steps to boost women’s representation on boards worldwide, WomenCorporateDirectors and its Global Nominating Commission unveiled a roadmap for decision-makers: “Improving Diverse Representation in the Boardroom.” The 14-point roadmap was introduced as part of WCD’s third annual Global Institute.
The WCD Global Nominating Commission – designed to help build the “supply chain” of women director talent – has rolled out a series of initiatives since its launch one year ago at last year’s Global Institute. The Commission’s activities include board education seminars as well as the publication of the Commission’s guide to “Best Practices for Director Development and Recruitment.”