Planning for Succession Inc.

Planning for Succession Inc.

February 11, 2010 09:00 ET

What Constitutes a Viable Succession Plan? New Security and Exchange Commission Rules Brings Board Transparency to the Fore

MIAMI, FLORIDA--(Marketwire - Feb. 11, 2010) - After Bank of America's hurried search to replace CEO Kenneth Lewis, it is widely believed that the U.S. Securities and Exchange Commission was spurred to change its position on disclosure of succession planning processes, resulting in increased transparency. A recent legal document, Staff Legal Bulletin No. 14E (CF), removes the rock under which corporations could hide their succession plans – or the lack thereof.

According to John Szold, CEO of Planning for Succession, "board members must now consider what will be needed to satisfy shareholder questions about process, communications and transparency…not to mention effectiveness."

He outlines five major issues for boards to consider when building a sound succession plan:
1. How much detail is required to develop and roll out an effective Succession Plan? Szold recommends that at minimum, boards identify the committee responsible for the succession planning, the use of an independent outside consultant to design and manage the process; and the scope of the process and its degree of readiness.

2. A single candidate is never enough Sophisticated shareholders will not accept that a corporation's succession plan has identified only one successor to the CEO. And risk-sensitive directors shouldn't either.

3. Qualifying criteria There may be legitimate reasons why there are very few or no internal candidates. At minimum, the succession plan should identify the skill sets needed for future success and industries in which succession candidates may be found. 

4. Internal staff management One of the most difficult parts of implementing a succession plan is establishing an internal communications policy. What makes the message tricky is that the corporation is revealing a planning process and not a firm decision. The confidential discussion with internal candidates has the potential to backfire and create winners and losers if not managed properly.

5. Failing to plan can be planning to fail One of the toughest challenges an organization will face is CEO transition. An effective succession planning process not only prevents a potential leadership crisis by proactive identification of candidates, it can also contribute to the development of high potential performers and retention of the organization's brightest talent.

In the absence of accounting-like standards, Szold believes there is considerable variation in qualifications of consultants that work on succession planning and in the quality of their advice. "Succession planning advisors should not be conflicted by the need to generate income through external candidate placement. And like compensation consultants, they should not be beholden to management," he says. 

For more information and the full Planning for Succession SEC client advisory, please visit here.

About Planning For Succession Inc. Planning for Succession works with boards of directors, management teams, private companies and family businesses to develop and implement effective succession planning processes. Consulting on CEO succession planning and other succession management issues, the firm helps clients in the United States and Canada identify the core competencies CEOs and other senior leaders will need to lead their organization forward. Planning for Succession applies a systematic approach to all succession decisions and balances subjective management evaluation with objective performance criteria and third party assessment. Services include: CEO succession planning / succession management, CEO assessment, CEO transition, performance evaluation, talent management and leadership development. For more information, pleases visit www.PlanningForSuccession.com.

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