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Few boards ready for change in CEO

Preparing for the day a chief executive officer says goodbye is a key job for any corporate board, but directors say it is too often relegated to the back burner.

Two-thirds of Canadian directors who took part in a recent study said they felt their board was spending too little time thinking about who their next CEO would be.

Close to 20 per cent said their company is not prepared or would find it tough to respond to a change at the top.

Patrick O'Callaghan, a Vancouver-based consultant who works with boards, says it is clear there is work to be done.

"This is the human asset that drives the corporation . . . Hiring, firing, this is the most important thing the board does," said Mr. O'Callaghan, whose firm conducted the study along with recruiting firm Korn/Ferry International. "If this is the most important thing the board does, why are they not spending more time on succession planning?"

Jeff Rosin, managing director of Korn/Ferry's Canadian operations, said one of the reasons directors shy way from picking a successor to their current leader is that it is such a tough thing to do.

Their actions can cause hard feelings among internal candidates who are passed over -- executives who they may know and respect, but who may decide to leave when it becomes clear they will not be the next CEO.

Rob Grandy, Korn/Ferry's Canadian board practice leader, said directors may be neglecting this issue just because they have so many other pressing matters fighting for their time.

"When you go to talk to these people, they have piles of material on their desk . . . binders and binders," he said.

The challenge, he said, is to keep the issue of future leadership top of mind. Directors need to see rising executives in action and get a feeling for how they work with people and handle difficult situations.

In fact, Mr. O'Callaghan and his colleagues say Canadian boards in general are better prepared for a transition in the corner office than they have ever been. They say most large firms have some plan for succession. Many have thought about who would take over in the case of an unexpected event, with one CEO even putting his directions in a sealed envelop for the board to open in an emergency.

Still, they say they found many directors, especially at small and medium-sized firms, who did not feel they were doing enough. Barely more than half of the 165 directors and CEOs they interviewed for the study said their companies were well prepared for a sudden change at the top.

Among the studies were other findings:

42 per cent of small companies said succession planning was not on their board's radar.

Half of those with formal succession plans said they were linked to their company's strategic plan.

58 per cent of CEOs in large companies were internal placements, compared with 32 per cent in mid-sized firms and 17 per cent in small firms.

More than half said the human resources committee of the board takes the lead in succession planning and 10 per cent said it was the CEO.

In spite of all the findings, 73 per cent said they were satisfied with the succession process they had in place.

By ELIZABETH CHURCH

source >>
The Globe and Mail: Few boards ready for change in CEO

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