The proverbial beer truck.

• Author: Rock, Robert H.
• Position: LETTER FROM THE CHAIRMAN

LAST YEAR a board on which I sit requested two CEO succession plans: one for a sudden unexpected event, such as "getting hit by a beer truck," and another for an orderly transition in four years, when our chairman is expected to retire. As chair of the governance committee, I began working with the independent directors to assure the development of these plans.

If our chairman/CEO is run over by a beer truck, we know what to do. Our lead director steps in as chair, and the major division head takes over as interim CEO. We jokingly tell our chairman to be careful when crossing the street; nevertheless, we are ready if he is careless when a beer truck rolls by.

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Every day, it seems, we hear about another CEO stepping down or being dismissed, leaving directors scrambling for a successor. In response, boards increasingly are preparing for the proverbial beer truck scenario.

Directors have always rated CEO succession as one of their most important, and often the most important, board accountability. Yet recent surveys by associations, consultants, and academics indicate that only about half of public companies have a meaningful CEO succession plan, and less than a quarter are fully satisfied with their plans. A recent Harvard Business Review article pointed out that succession planning is becoming more pressing as CEO tenure continues to shrink, down from an average of almost 10 years a decade ago to 7.5 years today. Over a third of newly appointed CEOs are...