Boards Check the CEO-Chair ‘Body Chemistry’
The Agenda article, “Boards Check the CEO-Chair 'Body Chemistry,'" quoted Russell Reynolds Associates Consultant Anthony Goodman on important considerations when it comes to board chair succession planning. The article is excerpted below.
A forthcoming report in the fall on board chair and lead director succession planning from Russell Reynolds shows that the most common profile among board chairs and lead directors is a 68-year-old man who has been in the leadership role for five years, with a total board tenure of 12 years among S&P 500 companies, says Anthony Goodman, a senior consultant in the firm's board and CEO advisory group.
Goodman often finds that boards don't think holistically about succession planning for board leadership roles, whether it's the lead director, chair or committee chairs. More often, the board reacts to a change in composition or another external factor, he says.
“When you're in it, you're kind of in it for life until you hit retirement age," says Goodman.
Now, however, boards must think about how that profile of an incumbent board chair coincides with Covid-19 risk factors, he says. Accordingly, directors should consider emergency succession plans for their lead director or board chair and succession as a longer-term issue.
Moreover, he points out that the way in which the board chair or lead director performed the role 10 years ago may not work as well today. For instance, shareholders now expect to speak directly with board chairs and lead directors, not just about compensation, he says. Board leaders are increasingly being asked about strategy, ESG, corporate culture, and diversity and inclusion by various stakeholders. Therefore, he suggests that boards consider what they need from the board chair or lead director, the talent on the board that could fit that role, whether potential successors are interested and have the time to devote to serving, and whether potential successors have followership among fellow directors.
Goodman of Russell Reynolds notes that he is often asked by boards whether seven or eight years as a committee chair is normal. He recommends a rotation every five or so years. However, the same question isn't often posed about the person in the lead director or board chair role. Therefore, he suggests that boards build a review of the role into the nominating and governance committee's processes. For instance, lead directors and board chairs are often former CEOs by design.
Goodman adds that the best boards think about board leader succession when they discuss CEO succession to ensure they're not changing both roles at the same time and so that the chair can serve as a guide, if needed, for the new CEO and then potentially step down or stay on, depending on the circumstances.
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