SUCCESSION PLANNING: BE THE BEST BY PREPARING FOR THE WORST

In December 2002, Xavier Debonneuil, head of Société Générale SA’s corporate and investment banking division, was killed in a car crash leaving a gap in senior management at one of France’s biggest banks. His death came at a time of upheaval in the French banking sector with Société Générale a possible takeover target following the merger between Crédit Agricole and Crédit Lyonnais. Yet the Wall Street Journal reported a few days after the accident that “a company spokesperson had no information on any succession plans”. It eventually took over two weeks for the bank to announce his successor. Compare this with Total SA’s announcement of a successor to chief executive Christophe de Margerie just two days after Mr Margerie’s death in a plane crash at a Moscow airport in 2014. As unpleasant as it might be, companies have to think the unthinkable and have a sturdy succession plan in place. Indecision can wreak havoc on a company’s share price.

Succession planning ought to be a major consideration for companies and yet the Winter 2014 FT-ICSA Boardroom Bellwether, ICSA’s regular survey of FTSE 350 boards, run in association with the Financial Times, found that only 51 percent of respondents reported a written succession plan for the board, the majority of which are reviewed annually.

Succession planning is most definitely a boardroom issue and directors should satisfy themselves that plans are in place for an orderly succession to maintain an appropriate balance of skills and experience. There is a huge opportunity for nomination committees to play a key role here. They are responsible for considering whether the board has the range of skills, experience, knowledge and independence needed to support the opportunities and challenges the company faces, and to implement future strategy. Ensuring that succession planning is in place for the chairman, CEO and senior independent director (SID) is a particular duty of care. If the chairman of the board also chairs the nomination committee, the SID should ensure succession planning for the chairman is carried out. Potential future board members from senior management should be identified and they should be provided with development and mentoring programmes.

Jul-Sep 2015 Issue

ICSA