Emergency Succession Planning - NACD BoardVision
Succession planning is one of the most important issues facing boards today, although it's not always on the top of the priority list. Join Christopher Y. Clark, Publisher of NACD Directorship Magazine and Theodore L. Dysart, Vice President of Heidrick & Struggles discuss how boards can best prepare for an emergency situation.
Hi I'm Christopher Clark, publisher of
NACD directorship magazine and this is
BoardVision. Today's topic is succession planning
with a focus on emergency succession planning. I'm joined
today by Ted Dysart, Vice-Chairman Heidrick & Struggles.
Great to be with you.
Now we are in 2014 - mid to late 2014 -
and I'm sure the State of the Union for succession planning has changed
you share some with those changes or different perspectives?
Yeah, I think it's changed a lot and clearly boards are paying a bit more attention to it although I don't think we're where we need to be. If you look at the data from last year
turnover in the S&P 500 was about eight and a half-percent there were 42 CEO's who turned over in the S&P 500 and we've seen that this really is one of the board's
most important responsibilities.
The reason I think boards have gotten better is, once again if you look at the data, about three-quarters are those CEO turnovers came from the inside which says the boards have been a little more thoughtful around preparing the next generation and making good decisions as they go to that generation.
Something that keeps me up late at night and I'm sure people like yourself terms a succession planning may be here but for emergency succession planning - only because I'm skeptical I don't believe is at the same state as what we just talked about.
I think a good example is we were working with one of our clients we were interviewing each other board members and I sat down with each of them and asked if they had an emergency succession plan and they told me they did. And then I asked them who the solution was, and each of them had a name. The problem is is when we were done we had three different names. As a result of that process and so you know it was clear that the intention was there but the reality and the finishing in that process wasn't quite complete
Emergency succession planning is also been a stress test for things in general can you flesh out a little bit.
It really is one of the most fundamental things if the board has a cohesive way debating and discussing in dealing with thorny issues. So I think succession planning is emblematic of a lot of other issues that are going on in the boardroom because it is such an awkward conversation for CEOs to get comfortable with. I think as we get into future generations that will get more comfortable, but it's talking about replacing someone who's very identified with the company and its leadership.
In regards to emergency succession planning - that that committee should be comprised only of independent directors. Tell me why.
Well I think the reality is is that the the CEO can have input into the discussions, but they really should not be in the room for the debate the dialogue because once that person’s in the room, people will censor their comments and not be as free as they would be otherwise, as the board’s in executive session discussing those issues. But clearly, when you're thinking about the talent pool inside the company, nobody knows that talent pool better than the CEO and you should take all the advantage of input and data you can get to come out the best decision.
They say it's uncomfortable for the CEO. It's probably uncomfortable for the board as well.
Yeah, because I think they put a lot of trust in whoever they select in that role, and whether you're talking about proverbial accident, i.e. the plane going down, or whether you're talking about a performance issue, it really can be an awkward thing for those board members to discuss out in the open.
For a board member time is critical, prioritizing, there's never enough of it. So let's go to the steps up kinda integrating succession planning, emergency succession planning, with the rest to their responsibilities. I do feel that these peeks outside are really important, but I'm sure you have chronological list of steps above and beyond that.
Yeah, I mean, I think the first step is to systemize and formalize the process, and a board needs to have this on its calendar on a regular basis - that might be once a year might be every other year. They need to look at the scenarios for that for that succession planning. If its emergency succession planning, is it a health issue that caused the CEO to step away, was a tragic accident? If it was a an issue of ethics and the CEO had to be removed quickly that might mean that you need to bring somebody else in on an interim basis, and then you need to look at the available candidates that you have both inside and outside to bring either on an interim basis or permanent basis as you consider the long-term future of the company.
Ted I really enjoyed our conversation today. Thank you for coming to the Harvard club and being a part of our BoardVision.
Thank you for having me.
On behalf of NACD and Heidrick & Struggles, thank you for viewing today. I'm Chris Clark and this is BoardVision.
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