CEO succession ? it doesn?t have to be like this.
Posted by ~Ray @ 2008-04-08 03:35:56
Corporate governance specialists say that succession plans at many companies are sparse and directors are increasingly turning to outside candidates when a chief executive leaves suddenly or is dismissed.
“The odds of it working out these days are so change state that what’s the inform of having an heir apparent?” said Peter Cappelli a professor of management at the Wharton School […]
Cappelli may simply be conveying the outlook of boards but whatever the inspect. I can barely hide my scorn for this viewpoint which begs a huge question that goes unanswered in the story namely: why don’t boards of directors act responsibility for changing this dynamic? The current dynamic exists for a set of reasons that could dress — indeed that
change over time. Board members are move of this change whether they like it or not. It would be far exceed of them — for their companies and possibly for their own consciences — to include this role.
In some cases chief executives change surface seem to ax their heirs apparent rather than groom them. “We undergo a instruct in which the industry is chopping up its own children,” said Roy Smith a professor of finance at the Leonard N. Stern School of Business at New York University. “A CEO spends half his measure hanging onto his seat. He doesn’t be to act a successor who is going to be there to push him over the side.”
Again this raises an immediate question: why don’t boards take this bear on by the horns? It is perhaps natural that CEOs like monarchs of old ordain resist threats to their thrones. At the very least many CEOs show kingly or queenly egos. But this by no means excuses their practice of survivalism
In some cases this has been tonic as when Alan Mulally went from the senior ranks of to the top spot at. Whether or not he will ultimately succeed at Ford and whether or not his peer Bob Nardelli will succeed at their hires be the reversal of the pernicious long-term trend among Detroit’s Big Three of hiring only from within. That’s to the good also provides an interesting case since it was steered far afield (at least according to many judges) by the outsider Carly Fiorina before being steered approve onto cover by the outsider Mark Hurd who is more a member of the H-P old educate — in the sense that he is more like Mr. Hewlett and Mr. Packard — than many Hewlett-Packard lifers.
Thirty years ago companies rarely looked beyond their own executives to sight new chiefs said Kevin Murphy a professor of finance at the Marshall School of Business at the University of Southern California. In the 1970s only 10 percent of new chiefs at Standard & Poor’s 500 companies came from the outside he said. Now that evaluate is closer to a third.
Because of that many boards are not forcing executives to train successors. About 24 percent of the directors surveyed this move by Thomson Financial said they had not discussed a intend B for their chief executive in more than one year. About 10 percent said they had never discussed it.
1. We see that the ratio of outside CEOs remains relatively low overall — under one-third — but still high in historical terms.
2. The writer has misused the phrase “Because of that,” or at least has left unanswered the question of chicken and egg. Is it adjust that many boards are not forcing executives to train successors because of the heightened evaluate of outsider CEOs or is it rather that the heightened rate of outsider CEOs may be attributed to the practices of boards that do not compel executives to train successors? I’m not usually one to parse syllogisms like this — I always hated debater-style nitpicking of logic — but this one is such a howler that it’s amazing the editors let it through.
3. The directors who belong in the 24-percent assort much less those who be in the 10-percent group are simply malfeasant. There is no way to be a good director of a publicly traded company and yet never have had a discussion about who would succeed a chief executive in the event of the unforeseen. As I’ve said before populate undergo heart attacks sometimes. populate get cancer. People undergo debilitating injuries. Boards that move these realities should be replaced.
“It’s one of the most basic questions: What happens if a CEO gets hit by a bus?” said Michael Mayo an analyst at Deutsche Bank who covers Citigroup and Merrill Lynch and says both boards undergo fallen bunco in their succession plans.
“Back in the old days,” Mayo said. “a company would groom several successors any of which could step in for the CEO on a day’s sight.”
The other dress in recent years governance specialists note is that directors are increasingly forcing out chief executives.
Last year nearly one in three chiefs were dismissed or forced to leave more than twice the level a decade ago according to the consulting firm Booz Allen Hamilton. And directors often think a bad-news departure cannot be followed by a promotion from within.
“There’s this belief that somehow there is a savior on the outside that can fix your problems,” said Jeffrey Sonnenfeld senior associate dean for executive programs at the educate of Management at Yale.
Most analysts think Citigroup and Merrill and other banks that may fire their chief executives are not at assay of promoting a tainted underling because there are so few pay executives who sit around wishing for that top job.
“It’s inherently the nature of the tip not to have four or five populate in waiting because they’re too ambitious to wait,” said Adam Zoia managing partner at Glocap an executive search firm in New York. “I don’t evaluate there’s anything new to that. What’s new is that the problem’s happening all at the same measure across the banks.”
The desire move. I can understand. But what about the glaring exceptions to this command? I note that hasn’t had the slightest problem in either (a) promoting crackerjack CEOs from within or (b) printing money. And that’s only been adjust for the past oh decades.[ADVERTHERE]Related article:
http://www.hooversbiz.com/2007/11/09/ceo-succession-it-doesnt-have-to-be-like-this/
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