1. What Shareholders Click to edit Master title style Should
Know About CEO Succession Plans, and Why. Master subtitle style
Click to edit What Shareholders Should Know About CEO Succession
Plans, and Why. about1/23/2013 1
2. Setting the Stage The responsibility for succession planning
belongs in the boardroom, and nowhere else. - The Conference Board
Clickistojob that is more important for the Board than There no
edit Master title style selecting the companys CEO and planning for
his/her succession. - Wachtell, Lipton, Rosen & Katz A boards
biggest responsibility is succession planning. Its the Click to
edit Master subtitle style the one area where the board is
completely accountable, and choice has significant consequences,
good and bad, for the corporations future. - National Association
of Corporate Directors (NACD) Report For citations, see Examining
the Impact of SEC Guidance Changes on CEO Succession Planning, by
Edward Ferris and Justus OBrien, The Conference Board Director
Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know About CEO
Succession Plans, and Why. about1/23/2013 2
3. Setting the Stage Securities and Exchange Commission Staff
Bulletin (SLB 14E), October 27, 2009 Click to edit Master title
style CEO Succession no longer ordinary business operations
Succession planning responsibilities are redefined as a key board
function and aMaster policy (and governance) issue Click to edit
significant subtitle style so that a company is not adversely
affected by a vacancy in leadership. What Shareholders Should Know
About CEO Succession Plans, and Why. about1/23/2013 3
4. Setting the Stage At The Time: 42% of companies had no CEO
succession plan Click to edit Master title style 46% of successions
were unplanned 40% of companies were not prepared for an emergency
succession 48% of directors saw CEO succession as the sole
responsibility of the CEO More than 60% of companies reported that
the CEO recommended his/her Click to edit Master subtitle style
successor 57% of directors said they did not know when their CEO
planned to step down Only 16% of directors believed their board to
be effective at CEO succession planning For citations, see
Examining the Impact of SEC Guidance Changes on CEO Succession
Planning, by Edward Ferris and Justus OBrien, The Conference Board
Director Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know
About CEO Succession Plans, and Why. about1/23/2013 4
5. Setting the Stage Its Important to Note External CEOs are
often paid significantly more than internally groomed Click to edit
Master title style ones; insiders tend to perform better and stay
longer 40% of CEOs leave within 18 months; 64% never make it to
their fourth anniversary It is commonly estimated that the faulty
integration of a senior executive can cost a company 10 to 20 times
the executive salary in opportunity costs Click to edit Master
subtitle style The leader effect can account for up to 40% of
variance in corporate performance and value CEOs tend to achieve
more in the first half of their tenure For citations, see Examining
the Impact of SEC Guidance Changes on CEO Succession Planning, by
Edward Ferris and Justus OBrien, The Conference Board Director
Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know About CEO
Succession Plans, and Why. about1/23/2013 5
6. Reputation Matters The Reputation of a New CEO Matters to
Investors. Click to edit Master title style 32% base decision on
perception of CEO Click to edit Master subtitle style CEO
Transitions and the Risk to Enterprise Value, FTI Consulting,
October 2011 What Shareholders Should Know About CEO Succession
Plans, and Why. about1/23/2013 6
7. Value at Risk With Greater Surprise Comes Greater Value at
Risk Click to edit Master title style Click to edit Master subtitle
style Planned successions present the lowest risk and can even have
a positive impact on stock prices at the time of the announcement.
CEO Transitions and the Risk to Enterprise Value, FTI Consulting,
October 2011 What Shareholders Should Know About CEO Succession
Plans, and Why. about1/23/2013 7
8. H-P after Mark Hurd Marc Andreessen to Maria Bartiromo CNBC
Special Report, August 6, 2010 Click to edit Master title style We
will run a search as fast as we can, but insuring we get the best
possible candidate. We will look at both internal and external
candidates in that process. We have just formed a committee, so
work will begin on this immediately. But were going to dive right
into it. And fundamentally, you know, were looking for someone who
is outstanding, Click to edit Master subtitle style who we can pair
up with a truly great company. The company is in great shape, its
extremely well positioned for the future. Were executing on the
strategy. The performance is strong, so were look at someone who
can both maintain that level of performance and then build on it.
What Shareholders Should Know About CEO Succession Plans, and Why.
about1/23/2013 8
9. Market Reaction Click to edit Master title style Click to
edit Master subtitle style HPs market value fell by $10 billion,
close to a 10 percent decline, following the resignation. What
Shareholders Should Know About CEO Succession Plans, and Why.
about1/23/2013 9
10. Shareholder Proposals The Board of Directors will review
the plan annually; Click to edit Master title style The Board will
develop criteria for the CEO position which will reflect the
Companys business strategy and will use a formal assessment process
to evaluate candidates; The Board will identify and develop
internal candidates; The Board will begin non-emergency CEO
succession planning at least three Click to edit Master subtitle
style years before an expected transition and will maintain an
emergency succession plan that is reviewed annually; The Board will
annually produce a report on its succession plan to shareholders.
What Shareholders Should Know About CEO Succession Plans, and Why.
about1/23/2013 10
11. Institutional Investors A (corporate) board should approve
and maintain a detailed CEO succession plan and publicly disclose
the essential features. Click to edit Master title style Poor CEO
succession planning and inadequate internal development of
managerial talent could result in a panicked board vastly
overpaying a replacement chief executive. Shareowners would be able
to assess the strength and appropriateness of CEO succession plans
if the essential features of such policies were publicly disclosed.
Click to edit Master subtitle style What Shareholders Should Know
About CEO Succession Plans, and Why. about1/23/2013 11
12. What Shareholders Should Know Succession Planning
Disclosure Should Include: Assurance that a CEO succession planning
process is in place; Click to edit Master title style
Identification of the board committee that is responsible for CEO
succession planning, and its charter; Assurance that the committee
members are qualified to oversee the CEO succession planning
process; The frequency with which this committee meets to discuss
CEO succession Click to edit Master subtitle style and the process;
in general terms, what this review looks like; The frequency with
which the full board discusses CEO succession and reviews the CEO
succession plan and process; in general terms what this review
consists of. Copyright 2012 Charlesmore Partners International,
LLC. All Rights Reserved. What Shareholders Should Know About CEO
Succession Plans, and Why. about1/23/2013 12
13. What Shareholders Should Know The Board Should Publicly
Verify: Click to edit Master title style That a candidate profile
for the next CEO has been developed and approved, and that this
profile incorporates qualifications necessary to lead the companys
business strategy in the time frame anticipated; That it is
satisfied with the quality and effectiveness of the CEO succession
planning process, and that a timeframe for CEO succession has been
developed and approved; Click to edit Master subtitle style That
viable successor candidates have been identified who are either
currently qualified, or who are on customized development programs
to gain those experiences and competencies necessary to meet the
successor profile criteria within the anticipated time frame;
Copyright 2012 Charlesmore Partners International, LLC. All Rights
Reserved. What Shareholders Should Know About CEO Succession Plans,
and Why. about1/23/2013 13
14. What Shareholders Should Know The Board Should Publicly
Verify: Click to edit Master title style That external searches are
underway (or scheduled) to deepen executive bench strength,
supplement the CEO succession pipeline, or fill perceived
capability gaps, should the board deem it necessary; That a program
of board exposure to succession candidates is in place; That a CEO
selection process has been defined, and that valid measures have
Click to edit Master subtitle style been developed to assess and
select the next CEO of the company; That an emergency CEO
succession plan has been developed and approved, including the
process for immediate appointment and communication of a successor,
and how frequently this plan is reviewed and updated. Copyright
2012 Charlesmore Partners International, LLC. All Rights Reserved.
What Shareholders Should Know About CEO Succession Plans, and Why.
about1/23/2013 14
15. What Shareholders Click to edit Master title style Should
Know About CEO Succession Plans, and Why. Master subtitle style
Click to edit Edward Ferris - (215) 353-6472 What Shareholders
Should Know About CEO Succession Plans, and Why. about
[email protected]/23/2013 15 www.charlesmore.com