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Transitioning from one CEO to the next is a pivotal moment in an organisation’s history. It is essential that the transition occurs smoothly so that the confidence of investors, business partners, customer and employees is maintained. This will furthermore provide the incoming CEO with a stable platform from which to drive the company successfully forward. A well-designed and properly executed succession plan is the key to an effective and smooth transition.
There are a number of essential elements to a successful CEO succession. Each dimension must be managed to mitigate the risks inherent in a leadership transition effectively. The best outcomes can be achieved by having best practices in place to manage the changes in a continuous process that will ensure that a company leader and board of directors are operating at peak effectiveness and efficiency.
Governance issues and managing governance challenges are now central tenets of everyday corporate life. The Sarbanes- Oxley Act of 2002 imposed numerous corporate governance requirements on U.S. corporations and likewise legislative or regulatory measures have been put in place globally.
The board is intended to be responsible to the stakeholders of a company and govern management in shareholders’ interests. However, in many instances, the board has become more aligned with the interest of the chief executive officer (CEO), who can often also act as the chairman of the board.
Diversity is a key consideration in all layers of company structure – from board level through all the levels of the workforce. Businesses are increasingly looking at the costs and benefits of diversity for a company – with particular focus on the boardroom – even adopting measures such as hiring diversity consultants, trainers and experts as well as a developing a diversity role in house.
CEO succession is a critical decision for corporations in the current business climate. Nominating committees must seek talent and must possess the insight and knowledge in selection so as to avoid falling short of finding the best candidate for the role. The nomination committee of an organisation is a fundamental part of the corporate governance structure of the enterprise.
CEO succession is a critical decision for a company. A smooth changeover and succession strategy is essential to maintaining the confidence of shareholders, investors, business partners, customers and employees. Additionally, an effective strategy provides the incoming CEO with a clear starting point from which to drive the company forward. A thoroughly planned and executed succession plan is the key to a successful transition in leadership.