The Handbook of Board Governance, 2nd Edition

4CEO Succession: Lessons from the Trenches for Directors:

Mark B. Nadler

Nadler Advisory Services LLC

Introduction

Let's start with the good news: Many businesses are doing a significantly better job than they used to when it comes to the all-important job of selecting a new chief executive officer. As boards have become more active and engaged over the past 10 to 15 years, the scales have clearly tipped in favor of a more professional, objective, and transparent succession process owned by the board rather than by the incumbent CEO.

However, before we declare “mission accomplished,” let's pause for a brief reality check. It's nice to think that boards have finally accepted their role as the ultimate owners of the succession process; yet, in the years and months leading up to the final vote on a new CEO, too many boards still look like an absentee landlord.

The good news is that the underlying approach to the succession process has changed faster and more dramatically than anyone would have predicted. Today, the great majority of directors agree—at least in principle—that boards should abandon the traditional succession model: an autocratic CEO orchestrating the selection of a personal favorite who demonstrates some combination of ill-defined qualities that somehow constitute “the right stuff.” Unfortunately, the old model persists in some form at far too many companies. We should remain highly skeptical of descriptions of the contemporary succession process as a meticulously ...