In fact, failing to plan for succession costs companies an average of $1.8 billion in shareholder value in comparison with companies whose boards have solid succession plans, according to the 15th annual study of CEOs, Governance and Success by Strategy&.
“In terms of succession planning, boards are ignoring the requirements of corporate governance, in which the board is theoretically the paramount governing body,” said Per-Ola Karlsson, report co-author and a Strategy& senior partner. “Boards should treat succession as a core critical issue, and take back the responsibility—and accountability—for choosing the next leader.”
Here are four questions that boards should ask to get succession planning right, according to Strategy&.
Strategy& noted that “even if it is discussed openly and frequently, the topic of succession will always cause some discomfort within boards. It’s a reality to be prepared for. And good succession planning requires significant investments of time and resources. But the investment is worth it, since the cost of failure is in the billions.”
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