The Handbook of Board Governance, 3rd Edition

7Model CEO Succession Planning Charter

Richard W. Leblanc, FCMC, CMC-AF, BSc, MBA, LLB, JD, LLM, PhD

Professor of Governance, Law & Ethics, York University, and Independent Governance Advisor

Introduction

CEO succession is the most important job of a board of directors. Nevertheless, the empirical data on CEO succession is not stellar. Many boards fail at this important area of responsibility or make mistakes on the basis of emotion, undue influence, a dominant incumbent CEO, improper interviews or reference checking, or other reasons.

A board committee should have CEO succession as part of its terms of reference, and succession planning should occur earlier in the incumbent CEO’s mandate so it does not appear as a lack of confidence when it occurs later. This committee can be the Human Resources Committee, the Nominating and Governance Committee (or the equivalents), or an ad hoc CEO Succession Planning Committee.

This committee reviews and recommends, and the board of directors reviews and approves. A written Emergency CEO Succession Plan and a Permanent CEO Succession Plan should be reviewed, discussed—including in the absence of the incumbent CEO, revised as necessary by management reporting to the committee, and reviewed and approved in writing by the board each year.

The emergency plan should contain a named individual who will be the interim CEO in the event of an unanticipated exit by the incumbent CEO whilst a permanent CEO is determined by the board. An emergency ...