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CEO succession planning low on boards' priority

Succession planning is 4th in priority for boards, lower than strategic planning, regulatory compliance and sustainability, finds a survey

Sudipto Dey  |  New Delhi 

CEO succession planning low on boards' priority

For most companies, succession planning only begins when a chief executive officer (CEO) departs, finds a study by (IiAS). 

Succession planning is fourth in priority for boards, lower than strategic planning, regulatory compliance and sustainability, finds the survey of 30 listed and 37 respondents, mostly CEOs, executive or independent directors. Around 27 per cent of respondents said they discuss succession planning only in the event of a CEO’s departure. Further, 27 per cent said their boards discussed planning once a year.

To tide over a CEO departure, 64 per cent said they preferred internal candidates over external ones. In without a formal succession plan, 74 per cent identified potential internal candidates by name in the plan. While 65 per cent said succession planning for a CEO was an ongoing process, 33 per cent took three months or more to identify a successor before the last CEO departed. The survey found most did not hire external consultants for succession planning. Only 30 per cent of respondents turned to consultants for the search process, the study said. 

“While corporate India is learning from past experiences of succession planning, its disclosure levels continue to remain a concern,” the study noted. Of the surveyed, 27 per cent did not have a plan. In 54 per cent, the plan was for internal use only. Only eight per cent had their plan on their website or annual report.  Framing a succession planning policy was formally included as one of the key responsibilities of the board of a listed company under the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015. This provision was absent under earlier laws. 

The report ‘Planning in India’ was brought out in association with IFC’s South Asia Corporate Governance Program, supported by the ministry of finance, Japan.

First Published: Wed, November 15 2017. 01:41 IST
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