Directors and Officers: CEO Succession Key for Risk Management
The CEO is the figurehead of the company. Especially in high profile companies, they command a large amount of attention and have a significant influence on the company’s brand and image. It is growing as a crucial risk management strategy as well. Investors, rating agencies, and governmental entities are starting to require information about succession planning. And internal talent development and a comprehensive CEO succession plan in many ways can translate directly into future shareholder/stakeholder value, as reassurance and showing foresight for the future growth and success of the company.
What happens if a CEO decides to step down suddenly, or is fired? In many cases boards look to an internal talent pool for CEO candidates. But they may not always be the best choice. In a survey by The Stanford Graduate School of Business, over 50 percent of respondents said they internal candidates for CEO were only “moderately” or “slightly” viable- hardly encouraging for the future leader of the company. Do you have a willing, viable replacement ready? Or a strategy to do so?
And, in establishing a benchmark of CEO successor candidates (including comparing the talent of internal candidates to external talent), only 20 percent felt they were “very” or “extremely” well-established.
Ensuring a smooth success is a critical responsibility for the Board of Directors and CEO. Having a strong succession strategy in place gives the Board, management team, employees and shareholders confidence in the long-term future of the company by reducing succession risk.
Directors and Officers are under increasing scrutiny, both in the public eye and by their shareholders. PLRisk Advisors, Inc. provides Directors & Officers insurance that is specifically designed for the exposures faced by public companies. Contact us today for more information. (855) 403-5982.