Sixth in a series of updates on how the pandemic is informing basic elements of governance.
Boards should reconsider the scope of their primary and emergency executive and board succession practices to reflect circumstances arising from the pandemic.
Leading statements of governance principles, such as those from The Business Roundtable and the Commonsense Principles, attribute high importance to board planning for CEO and senior management development and succession, in both ordinary and emergency scenarios. This is grounded in both effective governance and risk management philosophy.
While there is no established “best practice” on whether such planning should be done at the board or committee level, there is general consensus as to the key goals of such planning. These include:
- Identification of desired candidate qualities and characteristics
- Considering professional growth of internal candidates
- Conversing with the CEO on his/her assessment of candidates for the CEO and other senior management positions
- Conducting other succession planning independent of the participation of the CEO
A variety of issues arising from the pandemic suggest ways to add value to existing executive succession practices. Two of the most obvious are (i) confirming the ongoing validity of desired candidate qualifications (i.e., does the pandemic crisis and its collateral implications call for a different type of successor CEO?); and (ii) the need for effective emergency succession plans for all members of the senior management team and not just the CEO.
There is also value in considering how other companies have addressed unique executive succession issues (as reported in the media or otherwise). These include:
- Circumstances in which recently retired CEOs have returned to work to support the new CEO during the crisis environment;
- The possible need for executives to share certain tasks and responsibilities;
- The value of identifying an interim successor if a previously identified successor is not ready to assume the position;
- The process for transitioning to the new/interim/emergency CEO
- The elimination of co-CEO positions for purposes of efficiency and ease of communication and reporting
Identification of an experienced board member to serve as emergency or interim CEO or other senior executive can be an attractive alternative if pursued through a careful vetting process by independent and non-conflicted directors.
The unique circumstances of the pandemic also bring director succession matters forward earlier than anticipated by normal term expiration. This is especially the case as to the potential replacement of directors whose leadership role or experience are of particular importance to board operations.
These and other issues relating to executive and director succession merit near term board consideration given the realities of the pandemic. The chief legal officer can be a useful support to the board in this regard.
Click here to access the first article in this series, Corporate Authority for Extraordinary Delivery of Care Decisions.
Click here to access the second article in the series, The Executive Committee in Times of Crisis.
Click here to access the third article in the series, Virtual Board Meetings in Times of Crisis.
Click here to access the fourth article in the series, Emergency State Action Affecting Board Processes and Corporate Filings.
Click here to access the fifth article in the series, Assuring Appropriate Information Flow to the Risk and Compliance Committees.
Click here to access the seventh article in the series, Board Financial Oversight Responsibilities During Pandemic-Driven Distress.