The main sideshow was H-P’s handling of its decision to replace Mark Hurd including sending an under-prepared Marc Andreesson to front its public face, demonstrating its not just the decisions that you make but how you message them that is so important; the company saw $13.7B of shareholder value evaporate in a week.
The presentation centered on CEO succession and shareholder activism, coming soon after the SEC’s policy reversal on the issue and our subsequent Conference Board paper that analyzed the implications thereof.
In the session, we emphasized the following points:
- Many companies and boards do a poor job of CEO succession planning
- A changing governance climate is placing responsibility firmly in the boardroom; CEO succession is now recognized as a major policy and risk issue
- Poor CEO transition management is a big deal and a major business discontinuity
- Drawing a correlation between external CEO hiring and unpalatable levels of executive compensation, large investor groups are starting to challenge corporations to reveal details of their internal succession practices
- Companies will soon see activist investors leverage CEO succession-related governance deficiencies to advance their change agenda
- Knowing (and influencing) what the Board’s role in CEO succession planning should be
- Understanding why shareholders care about CEO succession planning
- Providing high level disclosure of CEO succession planning process to reassure shareholders of the Board’s oversight
- Knowing that there is no other job like the CEO … and that internal development is a multi-year process – absent such internal process external hiring (and higher costs) become inevitable
A copy of the presentation follows.
NIRI Southwest CEO Succession and Shareholder Activism
Posted by Edward Ferris, Partner Hedge Fund Solutions