By: Tracy Levine, Principal, Advantage Talent Inc., Managing Director: Renaissance Executive
Originally posted on TaLevine's Blog
In 2009, corporations saw executives exiting as their corporations’ economic health were failing and corporate sustainability questionable. These
abrupt departures during a critical time in the corporations’ fight for survival magnified the adverse affect of minimal or no succession planning.
Corporate Boards found themselves in the position of focusing on finding a leader rather than focusing on the immediate financial problems at
hand. If any company should be the poster child of poor succession planning in 2009, it would be the Bank of America Corporation. CEO
Kenneth Lewis resigned at a time when the company was in the process of paying back TARP money which ultimately resulted in a 2009 fourth
quarter loss of $5.2 billion. It took the Board three months to find a successor. Time that would have been better spent focusing on improving
corporate performance.
Originally posted on TaLevine's Blog
In 2009, corporations saw executives exiting as their corporations’ economic health were failing and corporate sustainability questionable. These
abrupt departures during a critical time in the corporations’ fight for survival magnified the adverse affect of minimal or no succession planning.
Corporate Boards found themselves in the position of focusing on finding a leader rather than focusing on the immediate financial problems at
hand. If any company should be the poster child of poor succession planning in 2009, it would be the Bank of America Corporation. CEO
Kenneth Lewis resigned at a time when the company was in the process of paying back TARP money which ultimately resulted in a 2009 fourth
quarter loss of $5.2 billion. It took the Board three months to find a successor. Time that would have been better spent focusing on improving
corporate performance.
In the past the SEC has supported the exclusion of shareholder proposals calling for succession
planning transparency. Corporate Boards have been able to Rely on Rule 14a-8(i)(7) to exclude this type
of information in the proxy. Rule 14a-8(i)(7) allows corporations to exclude information relating to the
day-to-day management of the workforce.
Shareholder proposals for strategic succession planning are now getting support from the SEC. The
SEC has changed its stance of classifying succession planning as part of the day-to-day operations.
Succession Planning is now considered a risk item that needs to be addressed.
planning transparency. Corporate Boards have been able to Rely on Rule 14a-8(i)(7) to exclude this type
of information in the proxy. Rule 14a-8(i)(7) allows corporations to exclude information relating to the
day-to-day management of the workforce.
Shareholder proposals for strategic succession planning are now getting support from the SEC. The
SEC has changed its stance of classifying succession planning as part of the day-to-day operations.
Succession Planning is now considered a risk item that needs to be addressed.
SEC Staff Legal Bulletin No. 14E (CF)
“One of the board’s key functions is to provide for succession planning so that the company is not adversely affected due to a vacancy in
leadership. Recent events have underscored the importance of this board function to the governance of the corporation. We now recognize that
CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day to-day business
matter of managing the workforce. […] Going forward, we will take the view that a company generally may not rely on Rule 14a-8(i)(7) to
exclude a proposal that focuses on CEO succession planning.” (http://www.sec.gov/interps/legal/cfslb14e.htm)
“One of the board’s key functions is to provide for succession planning so that the company is not adversely affected due to a vacancy in
leadership. Recent events have underscored the importance of this board function to the governance of the corporation. We now recognize that
CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day to-day business
matter of managing the workforce. […] Going forward, we will take the view that a company generally may not rely on Rule 14a-8(i)(7) to
exclude a proposal that focuses on CEO succession planning.” (http://www.sec.gov/interps/legal/cfslb14e.htm)
| SEC States Succession Planning a Key Board Responsibility |
Laborers’ International Union of North America (LiUNA) a long time proponent of succession disclosure had tried unsuccessfully in the past to
have their CEO succession disclosure proposals included in the proxy of numerous companies for shareholder vote. In 2010, corporations such
as Whole Foods, Bank of America and Verizon were forced to include LiUNA’s proposals for shareholder vote. Approximately 30% of the Whole
Foods shareholders, 40% of the Bank of America shareholders, and 33% of the Verizon shareholders voted for the proposal. Even though the
proposals were defeated the first time around, Corporate Boards can expect shareholder support for the proposals to grow if the issue is not
voluntarily addressed.
have their CEO succession disclosure proposals included in the proxy of numerous companies for shareholder vote. In 2010, corporations such
as Whole Foods, Bank of America and Verizon were forced to include LiUNA’s proposals for shareholder vote. Approximately 30% of the Whole
Foods shareholders, 40% of the Bank of America shareholders, and 33% of the Verizon shareholders voted for the proposal. Even though the
proposals were defeated the first time around, Corporate Boards can expect shareholder support for the proposals to grow if the issue is not
voluntarily addressed.
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