Succession planning a weak point

The sudden loss of a chief executive officer (CEO) whether due to him/her being removed from the company, or whether due to death or illness, can be a real business continuity threat. Short term confusion and lack of clear leadership can lead to irreversible reputation damage, as well as direct financial impacts. Despite this, a recent survey has found that approximately 50 percent of boards surveyed from US public, private and non-profit corporations consider themselves less than effective in the area of CEO succession, and only roughly half currently have a succession plan in place.

The National Association of Corporate Director's (NACD) research arm, The Center for Board Leadership, conducted the ‘2006 Governance Survey’ in collaboration with Mercer Delta Consulting.

The survey also found that boards consider CEO succession a more important issue than ever, climbing in prominence since last year. For directors on public boards, CEO succession is the second most critical board concern, up from last year's third; while for directors on private boards, it ranks as the third most important issue, up from fifth last year. Companies are increasingly feeling pressure to more effectively identify and develop executive talent, particularly when it comes to the senior leader.

"The risk highlighted in the 2006 Governance Survey is a clear gap between succession planning and leadership depth, and the board's ability to address these issues," said Elise Walton, partner and head of Mercer Delta's corporate governance practice. "For any corporation best practices must be championed at the top, and that means even greater involvement at the board level. The board should always have a plan from day one, so a sudden vacancy doesn't create a crisis."

www.nacdonline.org

•Date: 14th Dec 2006• Region: US •Type: Article •Topic: BC general
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