Board and management succession planning: key issues for boards to consider when addressing succession planning.

• Author: Vazquez, Steven W.

The CEO, senior corporate officers, and board members typically possess a valuable combination of intelligence, skills, and experience. Because they play important roles in a corporation, their loss can have a major impact on the corporation's short-term operations and long-term prospects for success.

Management succession planning

Boards of directors have a fiduciary duty to address business risks to which the corporation may be exposed, including the inevitable loss of senior corporate officers. Addressing losses on an ad hoc basis can prove unwise and costly. Without proper planning, boards often find it exceedingly difficult quickly and effectively to attend to tasks associated with replacing a senior officer, including:

* Assigning executive search functions to committees or external recruiting firms;

* Identifying qualified candidates to succeed the departing officer;

* Interviewing and negotiating with candidates;

* Communicating the officer's departure to the corporation's constituents; and

* Addressing administrative and legal matters, including securities filings.

Following are key issues for boards to consider, and ideas for overcoming obstacles boards may encounter during management succession.

Identify company insider successor candidates

Many boards find company insiders better suited than outsiders to succeed senior officers. First, the board can readily interact with company insiders to determine whether they possess the requisite intelligence, professional and interpersonal skills, and understanding of relevant markets and the corporation's business plan. Second, company insiders are familiar, and presumably compatible, with the corporation's culture. Third, the corporation's other employees will be familiar with, and likely comfortable, working with insiders.

In order to identify and groom company insiders to succeed senior officers, boards should get to know up-and-coming executives at the organization. Regular interactions over time such as dinners, presentations and retreats help the board get to know the candidates in an unstructured setting. Candidates should be provided with feedback to understand their strengths and areas for improvement.

Reduce the plan to writing and review regularly

It is a good idea to put the management succession plan in writing because when needed, it will be difficult to describe the plan orally in an accurate manner. A well-written management succession plan accounts for a variety of...