The 'untoward' things that can happen.

• Author: Frey, Donald N.
• Position: SUCCESSION PLANNING

Ed. Note: Don Frey was the designer of the Ford Mustang earlier in his career as an engineer with the Ford Motor Co. Later on he became chairman and CEO of Bell and Howell Co. and a veteran director on many boards. He was comfortably ensconced in academia when he wrote a blistering critique of how boards fumble their succession responsibilities ["Reminiscences on Succession Planning," Spring 1995]. An excerpt follows. Frey died in 2010.--J.K.

Succession planning is a most important role for a board of directors--in many cases the most important role. With a cumulative total of over 80 years of service as an outside director of various Fortune 500 companies, I have seen many styles of succession planning, everything from brilliant to stupid, from successful (say, for the employees and shareholders) to abysmal failure, and from thoughtfully planned to abruptly forced.

I have found the most important factor in succession planning to be the chief executive officer's appointive style with regard to the board members. If over the years an independent-thinking, competent board has been created, the succession process is usually approached both professionally and with good outcome. If the CEO has created a "kept" board, largely populated with buddies with no independence of thought or action, several untoward things can happen.

I have observed cases of CEOs trying to stay on (perhaps better said, hang on) after normal retirement. Various reasons are offered, one being that his or her successor is not yet ready and needs more mentoring by the CEO. In one case, no logical successor could be identified because the CEO in earlier years systematically destroyed potential successors, so that no one is perceived by the CEO as threatening or perceived by the board to be ready at his normal retirement. (Boards almost never hear both sides of a dismissal or demotion). Paranoia or lack of self-confidence are surprisingly not unknown, even with successful CEOs. For whatever reason, the sitting CEO is kept on year after year by a supine board, sometimes until the...