Edward Ferris and Justin O’Brien recently published a paper for the Conference Board (members only) entitled, Examining the Impact of SEC Guidance Changes on CEO Succession Planning. The paper is a must read for anyone interested in CEO succession and its implications for corporate governance and corporate performance. According to the report as a result of the recent change by the SEC,
… regulators have reframed CEO succession as a risk management issue and placed its responsibility firmly in the boardroom. Succession planning responsibilities are redefined as “a key board function” and “a significant policy (and governance) issue … so that a company is not adversely affected by a vacancy in leadership.”
… the implications seem clear: boards will have to set more specific standards and requirements for CEO succession, take responsibility for results, and exercise discernable independence in the process.
Against this backdrop, the report seeks to answer three questions:
• What is the likely impact of this policy reversal?
• How will it practically affect the board?
• What should shareholders know about CEO succession plans, and why?
I highly recommend anyone interested in the succession issue read the paper. If you are not a member of the Conference Board, you might want to contact one of the authors, Edward Ferris, at the Hedge Fund Solutions Research Center. His email is firstname.lastname@example.org.