Succession Committee Imperatives

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Leadership often finds itself reacting to difficult situations. Good leadership is defined by the actions they take in a crisis. Great corporate leadership plans for unexpected issues to crop up and takes action according to the plan rather than reacting to the crisis. The speed at which corporate America operates is mind numbing. Corporations spend millions of dollars hiring advisers to monitor single issues, and tens of millions of dollars hiring compliance management firms specializing in Sarbanes-Oxley laws. Regulations direct the governance of boards and committees and affect how companies engage in strategic planning. However, one issue is often over looked until a crisis arises. Who will run the company if the present CEO is debilitated?

No one set of activities will cover every company’s succession planning needs, however there are several good governance policies all succession planning exercises should have in common.

• The CEO should be involved as an advisor. This is important because the process should be transparent. The CEO should not be surprised to find his board planning for a new CEO. If the board is looking internally, the CEO should be able to offer insights into the strengths and weaknesses of his management team. If they are looking externally, the advice should focus on the characteristics, strengths and experience that the right candidate should have.
• While the process should be transparent, the deliberation should not be. Corporate ethics should require the boards and the committees advising the board to maintain strict confidentiality of the discussions involving individual directors or senior management. Any discussion of the current CEO’s leadership style should be handled carefully. The CEO is the leader of the management team, and any assessment should remain in the board room.




• Leadership assessment should be conducted annually by the board of directors. Sarbanes-Oxley places the responsibility of succession planning on the board of directors. Compliance with Sarbanes-Oxley is necessary, but good board governance requires planning to generate the best possible outcome for the company. Leadership assessment allows the succession committee to understand corporate management’s abilities and to offer coaching and leadership development activities to improve the company’s performance now and to build strong leaders for the company’s future.
• The board should discuss and review characteristics the company needs in a CEO. Every company has a culture, its own corporate ethics, and its own set of strengths and weaknesses. Boards should agree on the type of leadership needed to carry out its next strategic plan. This is a matter for the entire board and should not be delegated to the succession committee.
• Succession committees should work within clear guidelines provided by the board. A governance model detailing the regularity of meetings, the directors expected time contribution, the advisers the committee should use and a time frame to finish the plan.
• The succession plan should not be static. It should be reviewed and updated on a regular basis.
• At each board of director’s meeting during the succession planning process, the Chairman of the succession committee should report on issues and the progress of the committee. Periodically, the Chairman of the board of directors should call for the succession committee Chairman to report the findings of any reviews or updates affecting the succession plan.

A corporate board of director’s prime responsibility is for the preservation and increase in shareholder’s value. Professional governance requires assessment, planning, reviewing and action on plans. Succession planning should be treated with the same care and diligence as any other corporate board issue.

© Dr. Earl R. Smith II

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• New Board Member Selection

• Practical Governance Practices

• Nomination Committee Strategies

• Characteristics of a Task Oriented Director

• Some Notes on Board Compensation Norms

• Officer and Director Vetting

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