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Firms Lag on CEO Succession

Melissa Klein Aguilar | December 22, 2010

Those tasked with prioritizing their company's corporate governance to-do lists for 2011 might want to recheck them to see where succession planning falls on that list. Chances are it's not near the top, but it probably should be, according to results of a survey by executive search firm Korn/Ferry.

The vast majority of global executives report that their companies don't have a CEO succession plan in place, even though they say it's an important element of overall corporate governance. Nearly all of those polled view CEO succession planning as an important piece of the overall corporate governance process, Korn/Ferry reports. Despite that, only 35 percent of more than 1,300 respondents say their company has a CEO succession plan.

The abrupt ouster of former Hewlett-Packard CEO Mark Hurd in August put a media spotlight on succession planning. It appears, however that even the headlines denoting the hasty departures of some high-profile CEOs haven't been enough to sway some companies. More than 350 executives responding to the Korn/Ferry survey said about unexpected CEO departures haven't increased attention to succession planning. The findings echo results of a June survey on succession planning by Heidrick & Struggles and Stanford University's Rock Center for Corporate Governance.

There's another reason companies may want to pay attention to succession planning issues: Their investors are. According to ISS's U.S. 2010 Post-Season report, shareholder proposals seeking reports on CEO succession planning averaged 34 percent support at three firms last year, and investors plan to file more succession planning proposals in 2011. The Securities and Exchange Commission paved the way for more succession planning proposals to show up on corporate ballots when it published a staff legal bulletin in October 2009.