CEO succession planning is a critical board responsibility — and a big challenge. According to Dr. Julie Bell, director, leadership advisory at Chartwell Partners, boards can follow a five-step process to ensure an orderly, informed succession planning process. That process includes nailing down a timeline, evaluating the candidates and coming up with a coaching plan to close any skills gaps in a would-be successor.
My wife and I recently completed watching all three seasons of HBO’s “Succession.” It’s a wild ride on many levels, full of deceitful and dysfunctional family dynamics, corporate political backstabbing, and plain old evil greed. Despite this over-the-top intertwined family and business drama, there are quite a few relevant lessons worthy of attention from bank leaders and board members. Three in particular stand out to me.
First: Succession planning is always vital, and never more so in an organization (public or private) with any element of familial involvement. As is well known, all boards of directors should be paying close attention to succession for the CEO role and other key leadership positions. In the HBO show, there is no clear line of succession, and the company’s 80-year-old patriarch (who experiences major health issues early in season 1) has not only failed to plan for his eventual departure but has all four children thinking they can and should take over the “family” business. Only one of the four is even close to qualified, and he becomes compromised by external events. Meanwhile, daddy plays each sibling against each other. It is a mess which devolves into chaos at various times, seriously impacting both the fortunes and future independence of the business.
Second: Where is the board of directors? In this instance, the company, Waystar Royco, is a publicly traded global media and entertainment conglomerate, but the board is not governing at all. The single most important responsibility of any board of directors is the decision of “who leads”. This goes beyond the obvious CEO succession process, ideally in a planned, orderly leadership transition or worst case, a possible emergency situation. It more broadly relates to an ongoing evaluation of the CEO and his or her competency relative to the skills, experiences, leadership capabilities, temperament and market dynamics. Too many boards allow CEOs to determine when their time is up, rather than jointly crafting a plan for a “bloodless transition of power,” that encourages (or even forces) a constructive change of leadership. In “Succession,” the board is comprised of cronies of the patriarch — and his disengaged brother — who are both beholden to and intimidated by their successful and highly autocratic CEO.
Lastly, in any company with a sizable element of family ownership, the separation of economic ownership and executive leadership is vital. While at times the progeny of a successful founder and leader prove extremely capable (see Comcast’s Brian Roberts), this is often the exception rather than the rule. Therefore, the board and/or owners ideally will address this dynamic head-on, accepting that professional management is indeed the best way to enhance economic value for shareholders and family members while encouraging the offspring and descendants to keep their hands off and cash the checks. Many privately held banks grapple with this same dynamic.
Such decisions, of course, are fraught with peril for those involved, which “Succession” endlessly highlights. Creating the proper governance structure and succession plans is rarely easy, especially when personal and financial impacts weigh heavily on the individuals involved. Still, with the board’s prime directive of leadership selection top of mind, and a commitment to candor and transparency, the outcome will likely be much better than simply ignoring the elephant in the room.
When season four of HBO’s “Succession” rolls around, it will surely provide more examples of how not to govern properly.
David Findlay didn’t set out to become a banker.
After earning a degree in history from DePauw University in Greencastle, Indiana, Chicago-based Northern Trust Corp. hired Findlay as a commercial banker in the mid-1980s. He didn’t take accounting or finance courses in college, and says that he struggled through the company’s training program. At his 90-day review, he was put on probation. Findlay persevered, he adds, because “Northern, where I spent the first 11 years of my career, was an organization much like ours that says, ‘We’re here to help people succeed.’”
Findlay’s gone far since those early struggles: Today, he leads $6 billion Lakeland Financial Corp., in Warsaw, Indiana. Year after year, it’s one of the most successful banks in the country, according to Bank Director’s RankingBanking analysis, consistently ranking among the top 25 public banks in the U.S.
The reflections on his 38-year career — including his years at Northern Trust — inform a leadership course he teaches at Lake City University, a training program for the company’s subsidiary, Lake City Bank. Any employee can take the class — or any of the classes taught by Lakeland’s executives and leaders. On average, employees participate in these in-person training classes five or six times annually.
Focusing on his past can be a humbling experience, he says. “Teaching this course helps keep me grounded, to remind me of the challenges that I’ve had during my career,” says Findlay. “It’s sharing our own personal successes and failures — and the failures [are] as important as anything to show that you can work through them and have a career path that you can be proud of when it’s all said and done.”
If that sounds hands-on, that’s just an indicator of Findlay’s leadership style. In previous reporting, executives described him to me as a CEO that values direct connection with the bank’s employees and clients. He’s also developed a flat organizational hierarchy where decisions aren’t concentrated in one individual. Put simply, he trusts his bankers.
“An organization that places too much emphasis on one decision maker or a small group of decision makers, I think finds it very hard to move forward and be as progressive as an organization as you need to be. People think of banking as a pretty slow-moving, boring business. But it’s a pretty dynamic business,” he explains. “We love to tell our investors that we’re an execution-oriented organization. … We gather information, we assess the circumstances, we make decisions, and then we go, and obviously that’s contributed some long-term, consistent success for the bank.”
In this edition of The Slant podcast, Findlay also shares his views on how commercial banking has evolved, the impact of technology on relationship building, whether it’s harder to be a CEO in today’s environment and his views on the year ahead. He’s looking for a return to normal, he says. Lake City Bank doesn’t rely on M&A to grow; it focuses on growing its customer base and taking market share from competitors. That slowed in the pandemic.
“We lost that momentum of market share take,” Findlay explains. But he expects business development to pick up. “[It’s what] I’m looking forward to the most; that’s the idea that we are back out calling on our prospects, developing those opportunities.”
In late January 2023, Findlay will participate in a panel discussion at Bank Director’s Acquire or Be Acquired conference that shares perspectives from the leaders of three top performing banks in the RankingBanking study.
This episode, and all past episodes of The Slant Podcast, are available on Bank Director.com, Spotify and Apple Music.
In an advisory vote earlier this year, shareholders roundly rejected JPMorgan Chase & Co.’s executive compensation package, particularly a whopping $52.6 million stock option award for CEO and Chair Jamie Dimon. But at the same time, shareholders voted against a proposal to split those roles.
The proxy advisory firms Glass Lewis and Institutional Shareholder Services favor separating the CEO and chair roles. “Executives should report to the board regarding their performance in achieving goals set by the board,” Glass Lewis explains in its 2022 voting guidelines. “This is needlessly complicated when a CEO chairs the board, since a CEO/chair presumably will have a significant influence over the board.”
An analysis of Bank Director’s Compensation Survey data, examining fiscal year 2019 through 2021, finds that CEOs earn less when their board has an independent chair. Most recently, the 2022 Compensation Survey, sponsored by Newcleus Compensation Advisors, found that banks with separate CEO and chair roles reported median total CEO compensation of $563,000, compared to $835,385 where the role was combined.
The results are striking, but they should be taken with a grain of salt. The information collected from the survey, which is anonymous, doesn’t include factors like bank performance. Respondents skewed toward banks with an independent chair. And data alone can’t sufficiently describe what actually occurs in corporate boardrooms.
“I can’t really say which model works better. Look at Jamie Dimon; that’s worked really well for the shareholders of JPMorgan Chase, whereas I think there have been three or four initiatives to try to split that role,” says Jim McAlpin Jr., a partner at the law firm Bryan Cave Leighton Paisner. McAlpin also serves on the board of Bank Director’s parent company, DirectorCorps. “It was voted down every time by the shareholders.”
CEOs typically negotiate when and whether they’ll eventually be named chair when they join a bank, says McAlpin. “If you have a very impactful, strong CEO who wants to be chair — most boards will not deny him or her that position, because they want [that person] running the bank.” It’s a small price to pay, he adds, for someone who has such a dramatic influence on the bank’s performance. “There is nothing more important to the bank than a CEO who has a clear vision, who can show leadership, form a good team and can execute well,” says McAlpin.
But it’s important to remember that boards represent the interests of the shareholders. “The most important thing a board has to do is hire and retain a quality CEO. Part of retaining is getting the compensation right,” says McAlpin. “It’s important for the board to control that process.”
McAlpin favors appointing a lead director when the CEO also has the chair position, to provide input on the agenda and contribute to the compensation process.
Truist Financial Corp., in response to shareholder pressure around chair independence in 2020, “strengthened” its lead independent director position, according to its 2022 proxy statement. Former Piedmont Natural Gas Co. CEO Thomas Skains has served as lead independent director of the Charlotte, North Carolina-based bank since March 2022. Skains has the authority to convene and set the agenda for executive sessions and other meetings where the chair isn’t present; provide input on the agenda, and approve board materials and schedules; and serve as a liaison between the independent directors and CEO and Chair William Rogers Jr.
But one individual can’t single-handedly strengthen the board, says Todd Leone, a partner and global head of executive compensation at McLagan. The compensation committee is responsible for the company’s pay programs, including executive compensation, peer benchmarking, reviewing and approving executive compensation levels, recommending director compensation, evaluating the CEO’s performance and determining the CEO’s compensation. With that in mind, Leone says the strength of the compensation committee — and the strength of its committee chair — will influence the independence of these decisions.
Leone also believes that increased diversity in the boardroom over the years has had a positive effect on these deliberations. “A diverse board, in my experience, they’re asking more questions,” he says. “And through that process of asking those questions, various things get unearthed, and the end result generally is stronger pay programs.”
Twelve years of Say-on-Pay — where public company shareholders offer an advisory vote on the top executives’ compensation — has also benefited those decisions, he says. Today, most long-term incentive plans are based on a selection of metrics, such as return on assets, income growth, asset quality and return on equity, according to Bank Director’s 2022 Compensation Survey. And in August, the U.S. Securities and Exchange Commission passed a pay versus performance disclosure rule that goes into effect for public companies in the fiscal year following Dec. 16, 2022.
“There’s a much higher bar for getting these plans approved,” says Leone, “because the compensation committees feel much more responsibility for their role in that process.”
In McAlpin’s experience, the best CEOs have confidence in their own performance and trust the process that occurs in the boardroom. “If they don’t like the results, they’ll give feedback, but they let the process unfold,” he says. “They don’t try to overtly influence the process.”
Heading into 2023, Leone notes the whipsaw effects that have occurred over the past few years, due to the pandemic, strong profitability in the banking sector and looming economic uncertainty. These events have had abnormal effects on compensation data and the lens through which boards may view performance. “We’re in a very volatile time, and we have been on pay since the pandemic,” says Leone. “Boards, [compensation] committees and executive management have to be aware of that.”
Boards at banks that are looking to position themselves for long-term success should consider leveraging a more robust executive assessment process for their senior leadership. This process can provide directors with a well-rounded picture of where their institution is now, along with specific insights to develop leaders, drive results and set up the bank for future succession for key roles.
There are three reasons that banks should consider an assessment tool and coaching with your management team. Many organizations use basic assessment tools when hiring leaders; rarely do organizations implement a more holistic executive development process that leverages the insights an assessment tool provides. But now, more organizations are experiencing the value of pairing an assessment with a leadership development plan that includes third-party coaching. Employing best practices gives top-performing organizations a dynamic executive development model to drive the following outcomes:
1. Succession planning: A strong succession plan identifies key competencies for the banks and the necessary skills for business continuity. The plan allows for focused development that meets the bank’s future business needs. A starting assessment makes development easier. Good assessments will consider an individual’s skills, personality, influence, communication and leadership abilities, plus a development plan that often includes coaching.
2. Retention: Assessments can increase engagement by creating a vision for advancement if they’re used correctly. Leaders who stagnate in a job tend to be more likely to leave. A well-rounded assessment tool can help a board uncover growth opportunities for the team and reveal untapped skills that are useful to the organization.
3. Dynamic leadership: Being your best every day is hard when you do it alone. Performers at every level can use a coach to bring out their best. An initial assessment that provides insight into the individual and team dynamics can fast forward an organization’s financial performance and set up the bank to outperform in the industry.
Assessments at all levels of the bank lead to higher engagement and retention. They can highlight tensions early, so executives and the board can proactively solve them rather than use reactive temporary fixes. But the power of assessment comes from choosing the right tool.
Top Two Mistakes
1. Assessment to check the box: Too many banks use an assessment to produce a label or outline a gap. They present these results to the team without a development plan to close the gaps, and many are left feeling underappreciated and frustrated. In these cases, assessments damage the culture. Good assessments produce data that allows boards to create a plan and take action. A great assessment does this — and then increases the readiness of participants to engage in next steps.
2. Off the shelf tool with no qualitative research component: Have you ever taken an assessment and felt constricted or limited by the way the question was asked? “Are you most like this or less like that”? You want to answer “Yes,” but that isn’t a choice. No employee likes an assessment that is difficult to complete. But at the same time, bank management teams need the quantitative data that is easy to build the big picture. The best assessment tools will combine this quantitative data with qualitative research.
When looking for an assessment tool, consider these components:
• Online assessment: A user-friendly online tool can quickly capture personality insights, team dynamics and leadership strengths. Boards should look for a tool that produces insights into both individual strengths and gaps, as well as team communication.
• Qualitative research: When using an assessment vendor, be sure to get a sense of their industry knowledge and experience with interviews for assessment.
• Your tools: Rounding out a powerful assessment is the incorporation of tools your bank has already used — anything from performance reviews to grit studies. The final assessment presentation can include data that the bank has previously gathered.
The chief executive officer is usually the single most important person in any organization, but it’s a job that most individuals grow into over time. The transition is often filled with challenges and difficult learning experiences.
Such was the case for Ira Robbins, the chairman and CEO at Valley National Bancorp, a $54 billion regional bank headquartered in Wayne, New Jersey. The 48-year-old Robbins was just 43 when he succeeded long-time CEO Gerald Lipkin in 2018. Lipkin, on the other hand, was closing in on his 77th birthday when he passed the baton to Robbins after running the bank for 42 years.
Robbins is deeply respectful of Lipkin but shares that one immediate challenge he faced was changing a culture that hadn’t kept pace with the bank’s growth over the years. He said Valley National was a $20 billion bank that operated as if it was still a $5 billion bank. Changing that culture was not easy, and he had to make some very difficult personnel decisions along the way.
Robbins is thoughtful, introspective and candid about his growth into the CEO role at Valley National. His reflections should be of great interest to any banker who hopes to someday become a CEO.
This episode, and all past episodes of The Slant Podcast, are available on Bank Director, Spotify and Apple Music.
If anyone in banking has seen it all, it’s Jim McAlpin.
He’s sat in on countless board deliberations since he got his start under the late Walt Moeling, a fellow Alabamian who served as his mentor at Powell, Goldstein, Frazer & Murphy, which later merged with Bryan Cave in 2009.
“That’s how I started in the banking world, literally carrying Walt’s briefcase to board meetings. Which sometimes was a very heavy briefcase,” quips McAlpin. Moeling made sure that the young McAlpin worked with different attorneys at the firm, learning various ways to practice law and negotiate on behalf of clients. “He was my home base, but I also did lending work, I did securities work, I did some real estate work. I did a lot of M&A work” in the 1990s, including deals for private equity firms and other companies outside the banking sector.
But it’s his keen interest in interpersonal dynamics and his experience in corporate boardrooms, fueled by almost four decades attending board meetings as an attorney and board member himself, that has made McAlpin a go-to resource on corporate governance matters. Today, he’s a partner at Bryan Cave Leighton Paisner, and he recently joined the board of DirectorCorps, Bank Director’s parent company.
“I’ve gone to hundreds of meetings, and each board is different. You can have the same set of circumstances more or less, be doing the same kind of deal, facing the same type of issue or regulatory situation,” he says. “But each set of people approaches it differently. And that fascinates me.”
McAlpin’s a consummate storyteller with ample anecdotes that he easily ties to lessons learned about corporate governance. Take the time he broke up a physical fight during the financial crisis.
“During that time period, I saw a lot of people subjected to stress,” he says. “There are certain people who, under stress, really rise to the occasion, and it’s not always the people you think are going to do so. And then there are others who just fall apart, who crumble. Collectively as a board, it matters.”
Boards function based on the collection of individual personalities, and whether or not those directors are on the same page about their organization’s mission, goals and values. McAlpin’s intrigued by it, saying that for good boards, the culture “permeates the room.”
McAlpin experienced the 1990s M&A boom and the industry’s struggles through the financial crisis. On the precipice of uncertainty, as interest rates rise and banks weather technological disruption, he remains bullish on banking. “This is a good time to be in banking,” he says. “It’s harder to get an M&A deal done this year. So, I think it’s caused a lot of people to step back and say, ‘OK, what are we going to do over the next few years to improve the profitability of our bank, to grow our bank, to promote organic growth?’. … [That’s] the subject of a lot of focus within bank boardrooms.”
McAlpin was interviewed for The Slant podcast ahead of Bank Director’s Bank Board Training Forum, where he spoke about the practices that build stronger boards and weighed in on the results of the 2022 Governance Best Practices Survey, which is sponsored by Bryan Cave. In the podcast, McAlpin shares his stories from bank boardrooms, his views on corporate culture and M&A, and why he’s optimistic about the state of the industry.
The role of chief risk officer is no longer relegated to the largest banks. Ever since the Great Recession of 2007 to 2008, banks of all sizes have begun incorporating chief risk officers into the C-suite.
Nowadays, the role could be more useful than ever as community banks confront an assortment of risks and opportunities, including cybersecurity, emerging business lines such as banking as a service, as well as rising inflation and a potential recession.
In the earliest days of the pandemic, Executive Vice President and Chief Risk Officer Karin Taylor and the teams that report to her helped executives at Grand Forks, North Dakota-based Alerus Financial Corp. understand the potential impacts on the business and coordinate the bank’s response. They addressed employee concerns, made decisions about how to sustain the business during the pandemic, performed stress tests and helped human resources with establishing new policies and communication.
“[CROs] bring some discipline in planning and operations because we facilitate discussion about risks, help identify risk and help risk owners determine if they’re going to accept risk or mitigate risk. And then we do a lot of reporting on it,” she says. “If anything changed in the pandemic, perhaps it was a better understanding of how [the risk group] could better support the organization.”
At $3.3 billion Alerus, Taylor reports directly to the CEO and serves as the executive liaison for the board’s risk and governance committees. Her reporting lines include the enterprise risk group as well as the bank’s legal, compliance, fraud teams, credit and internal audit teams (internal audit also reports to the audit committee). Those kinds of reporting lines allows CROs to help manage risk holistically and break down information silos, says Paul Davis, director of market intelligence at Strategic Resource Management. Their specific risk perspective makes them useful liaisons for community bank directors, who are usually local business people and not necessarily risk managers.
“You’re going to have one member of the management team [at board meetings] talk about opportunities,” he says. “It’s the CRO’s job to say, ‘Here are the tradeoffs, here the potential risks, here the pitfalls and the things we need to be mindful of.’”
Southern States Bancshares, a $1.8 billion institution based in Anniston, Alabama, decided to add a CRO in 2019 as the company prepared to go public. Credit presented the largest risk to the bank, so then-Chief Credit Officer Greg Smith was a natural fit.
His job includes reviewing risk that doesn’t neatly fit into other areas of the bank. He also serves as liaison for the risk committee and sits in on other meetings, like ALCO, to summarize the takeaways.
“While I was focused on risk the entire time I’ve been at the bank, this broadened that horizon and it expanded my perception of risk,” he says.
For instance, the bank’s rollout of the new loan loss accounting standard made him consider risk in the bond portfolio. Working with several attorneys on the board made him think about reputation risk when the bank launched new products and services. That expanded perspective allows him to raise considerations or concerns that different committees or areas of the bank may not be focused on. He can also help the bank price its risk appropriately.
Taylor sees her role as helping Alerus and its directors and executives make empowered decisions; her job isn’t just to say “No,” but to help the bank understand and explore opportunities based on its risk appetite. However, she doesn’t think all community banks need a CRO. Banks of similar asset sizes may have very different levels of complexity and strategies; adding another title may be a strain on limited resources or talent. The most important thing, she says, is that executives and the board feels that they have the right information to make decisions. To that end, Taylor shared a list of questions directors should ask when ascertaining if banks have appropriate risk personnel.
Questions for Directors and Executives to Ask:
Boards have many duties, from overseeing the long-term strategy of the institution, to approving executive pay packages, to vetting and approving the budget. But one job that they often leave for another day: succession planning. Yet, for forward-thinking banks, having a process for succession not only can strengthen the organization in the future, but also build talent today.
Brian Moynihan, chairman and CEO of Bank of America Corp., recently spoke about this very fact. Despite not having plans to leave the institution he’s led since 2010, the 62-year-old Moynihan explained that the bank reworks its succession plan twice a year.
“We have a deep succession planning process that we go through every six months [on] the board that alternates between the senior most people and then … I do it multiple levels down so we’re always looking,” said Moynihan in an interview last December with CNBC’s Closing Bell. “The board will pick somebody. My job is to have many people prepared.”
Such a clear process makes Bank of America unique, in some regards. While surveys over the years have tried to pinpoint how many companies have formal succession plans, organizations often avoid outlining it to investors, leaving it an open question. The Securities and Exchange Commission revised disclosure rules in November 2020 to encourage companies to outline human capital resources, like diversity rates, employment practices, and compensation and benefits. Of the first 100 forms filed by companies with $1 billion in market capitalization, only 5% of the companies added any additional detail to the succession planning process, according to researchers working with Stanford University and corporate data provider Equilar. Bank Director’s 2019 Compensation Survey found 37% of bank executives and board members reporting that their bank had not designated a successor or potential successors for the CEO.
So much of a bank’s long-term success has to do with having a clear plan if the head of the business must leave. This becomes especially true if the CEO must step aside suddenly, like for a health concern or other emergency. It’s on the board to lead this search. But when done right, it can also become a powerful tool to prepare internal and external talent, a process embraced by the current CEO.
David Larcker has studied CEO succession planning as a professor at Stanford Graduate School of Business, where he leads the school’s Corporate Governance Research Initiative. “One of the two key things that boards do is hiring and firing the CEO,” says Larcker. Many boards, though, “do not put in enough time and effort in succession,” he adds.
By not taking an active approach to this part of the job, it can lead to the wrong hire, resulting in years of poor management. Larcker says one of the reasons for a lack of proper succession plans is often because it’s one of the least exciting roles a board undertakes, so it gets put to the backburner. Plus, since you rarely replace the CEO, it’s not always a priority.
Larcker and his research team sought to identify what occurs when a board lacks a succession plan. They looked at scenarios where the CEO left abruptly, either because the person resigned, retired or made other transitions. These are often the reasons disclosed to the public; in reality, the company may have fired a CEO without stating that fact. Out of the various scenarios, the researchers identified situations where the board and CEO likely parted ways due to performance.
Out of all the media citations, 67% of the time the company named a permanent successor in the announcement; in 10% of the cases, it appointed a permanent successor but after a delay; and 22% of the time it named an interim successor. Those moments of upheaval provide investors with the clearest insight into whether the board took a proactive approach to succession, since the plans aren’t often public.
When a company named an interim successor, that was one of the clearest signs that the organization fired the CEO without a plan in place, and the stock performance of the company performed the worst after the announcement. Also, it’s worth noting that 8% of the time, the company named a current board member to the CEO role. When that occurred, the company’s stock price often performed worse than when internal or external candidates were chosen.
What separates the organizations that can name a successful permanent successor from those that can’t? Often, it’s the organizations that have a clear line to the talent that’s growing inside and outside of the bank.
John Asbury knows all too well the need for this line of succession — it’s how he got the head role at Atlantic Union Bankshares, Corp., a $20 billion public bank based in Richmond, Virginia. When Asbury was tapped as CEO in 2017, he followed G. William Beale, who had helmed the bank — then known as Union Bankshares Corp. — for almost 25 years. The bank had done a full executive search starting two years before Beale stepped away. Now, despite not having any plans to retire, Asbury, 57, takes the job of building succession within the entire organization seriously.
“There are too few people in the industry who understand how the bank actually works or runs front to back,” Asbury says. “Oftentimes they have their area of specialty and not much else.”
Asbury, who sits on the board of directors as well, works with his human resources and talent evaluators to identify those within the organization who can fill executive roles. In addition to empowering them as executives, he gets them face time with the board. This provides the board with the ability to interact and know the talent that the bank has in the stable.
“We want these folks to understand how the organization works, and we want them at the table to talk about not just strategy for their business unit, but the bank strategy as well,” Asbury says.
Asbury recently showed this leadership style in a public way by announcing that President Maria Tedesco would add the role of chief operating officer, and he would hand over managing many of the day-to-day operations to Tedesco. This isn’t a succession plan put in place. Instead it’s giving Tedesco the ability to have 85% of the organization reporting to her, while she and other executives at the bank continue to report to Asbury.
Asbury thinks the move was needed to allow him the freedom to focus on growing Atlantic in other ways. But it also provides Tedesco with hands-on training in managing the organization. Despite the move, Asbury says that it doesn’t prevent him from working with the board on succession plans.
The compensation committee, which Asbury does not sit on, also runs succession planning at Atlantic Union Bank. Sometimes boards may be hesitant to discuss succession if the current CEO views the discussion as antagonistic. But Atlantic Union undergoes an emergency succession plan evaluation once a year — currently, Tedesco would step in as interim CEO if something unexpected occurred to Asbury. She even sits in on every board meeting except when the executive team is being discussed.
It’s a conversation that boards cannot be afraid to have. “If the CEO is on the board, that committee or board, has to own the process,” Larcker says.
What doesn’t work when it comes to succession planning? Having the new CEO step into the company while the outgoing CEO continues to helm the business for a few months to a year, added Larker. This design creates confusion from both the leadership and the staff on who they should listen and report to. “Ultimately, it’s a bad sign,” Larcker says.
Asbury knows that all too well. When he took the Atlantic Union role, Beale held the CEO position for three months while Asbury got acquainted with the organization. Within a few weeks, though, Beale let Asbury know that he would clear out the office and Asbury could call him if any questions arose. “Shorter is better in terms of transition,” Asbury adds.
That can only happen with a plan in place.