by Professor, David F. Larcker and Brian Tayan, Researcher, Corporate Governance Research Program, Stanford Graduate School of Business
It is very difficult for shareholders to know detailed information about CEO succession planning among the companies they have invested in. Although CEO deaths are rare, the sudden death of a CEO can provide insight into the quality of succession planning and governance of a company. Whereas some companies are able to appoint a successor immediately, others take weeks or months to do so.
In this Closer Look, we examine this issue in detail. We ask:
* Why haven’t more companies done a “reality check” on whether they have a truly operational succession plan?
* What can a board learn and what should it do if the market reacts positively to the death of its CEO?
* Should the board revise its succession plan if its CEO engages in risky hobbies or lifestyle habits?
Continue reading Sudden Death of a CEO: Are Companies Prepared When Lightning Strikes?
Topic tags: board governance, succession planning