by Catherine Dunn for Corporate Counsel, August 26th, 2011.
Between Apple CEO Steve Jobs stepping down from his iThrone and news of former Vice President Dick Cheney’s top-secret resignation letter, companies big and small might want to heed these timely reminders and ask: Do we have a succession plan in place?
Not least because, according to some major studies in recent years, many companies have no such plan.
Identifying the next round of leadership is a matter of good governance and risk management, says David Larcker, a professor at the Graduate School of Business at Stanford University.
“One of the key tasks of the board [of directors] is to ensure they have the right people in place,” Larcker explains. Even if boards are reticent about sharing the proprietary information involved in a succession—as has been mentioned in the closely held plan to hand off Apple’s top spot from Jobs to his COO, Tim Cook—they “have to convey to shareholders that they’re on top of this.”
On the risk-management side, says Larcker, the question is, “What is it I can do to mitigate undesirable things happening to the organization?” He adds, “These are tough decisions.” Planning for an emergency, an accident, or a potential executive ouster are not the most comfortable subjects for anyone.
But done well, a succession plan can gird a company when misfortune strikes. McDonald’s is credited with having a plan that served them well when two of their CEOs died in the course of a single year. And yet, the company proceeded “without a hitch” says Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. (continue reading… )