Serious gaps revealed in CEO succession plans.

• Author: Heffes, Ellen M.
• Position: SUCCESSION PLANNING - Chief executive officer

A new study, 2010 Survey on CEO Succession Planning, revealed that more than half of the companies surveyed could not immediately name a successor to their chief executive officer, should the need arise. Heidrick & Struggles and Stanford University's Rock Center for Corporate Governance surveyed more than 140 CEOs and board directors of North American public and private companies.

Stephen A. Miles, vice chairman at Heidrick & Struggles, says: "Not having a truly operational succession plan can have devastating consequences for companies--from tanking stock prices to serious regulatory and reputational impact."

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Among the key findings:

* While 69 percent of respondents think that a CEO successor needs to be "ready now" to step into the shoes of the departing CEO, only 54 percent are grooming for this position.

* A full 39 percent said that they have "zero" viable internal candidates.

* On average, boards spend only two hours a year on succession planning.

* Only 50 percent have a written document detailing the skills required for the next CEO.

* Fully 71 percent of internal candidates know they are in the formal development pool, but there is no regular communication.

* A majority--65 percent--haven't asked internal candidates whether they want the CEO job, or, if offered, whether they would accept.

In light of the results, Heidrick & Struggles' Miles and Stanford Graduate School of Business Professor David Larcker have these suggestions for boards of directors:

1. Recognize that succession planning as practiced by most...