According to recent studies, there is evidence to suggest that succession planning is not always given the necessary attention, particularly at the board level. The lack of focus on succession planning is further reflected in the disclosure practices of FTSE 350 companies, which indicates a significant gap in transparent reporting and accountability regarding the identification and development of future board members and senior executives.
The consequences of inadequate succession planning are evident when examining the statistics on sudden CEO departures. According to research by Russell Reynolds Associates, 175 chief executives stepped down across the world’s top public companies in 2022, up from 133 the previous year and at a five-year high.
London-listed companies accounted for one in five departures, the research found, with 38 FTSE 350 chief executives stepping down in 2022, more than double the 18 exits of the previous year.
These statistics underscore the importance of raising awareness and prioritizing succession planning.
Succession planning at the board level is a critical aspect of corporate governance in UK companies, as emphasized by the UK Corporate Governance Code. According to the Code, “The board should establish a nomination committee to lead the process for appointments, ensure plans are in place for orderly succession to both the board and the senior management positions, and oversee the development of a diverse pipeline for succession.” This requirement underscores the importance of identifying and developing talent throughout the organization, ensuring a smooth transition of leadership.
In conclusion, by actively engaging in succession planning, boards can not only mitigate risks associated with leadership vacancies but also foster a culture of talent development, diversity, and long-term organizational sustainability.