Seven Myths of CEO Succession

11 Pages Posted: 21 Mar 2014

See all articles by David F. Larcker

David F. Larcker

Stanford University - Graduate School of Business

Stephen Miles

The Miles Group (TMG)

Brian Tayan

Stanford University - Graduate School of Business

Date Written: March 19, 2014

Abstract

Many believe that the selection of the CEO is the single most important decision that a board of directors can make. In recent years, several high profile transitions at major corporations have cast a spotlight on succession and called into question the reliability of the process that companies use to identify and develop future leaders.

In this Closer Look, we examine seven common myths relating to CEO succession. These myths include the beliefs that:

1. Companies Know Who the Next CEO Will Be 2. There is One Best Model for Succession 3. The CEO Should Pick a Successor 4. Succession is Primarily a “Risk Management” Exercise 5. Boards Know How to Evaluate CEO Talent 6. Boards Prefer Internal Candidates 7. Boards Want a Female or Minority CEO

We examine each of these myths and explain why they do not always hold true. We ask:

• Why aren’t more companies prepared for a change at the top? • Would directors make better hiring decisions if they had better knowledge of the senior management team? • Would they be more likely to hire a CEO from within? • Would they be more likely to hire a female or minority candidate? • How many succession should a director participate in before he or she is considered “qualified” to lead one?

Topics, Issues and Controversies in Corporate Governance. The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

Keywords: corporate governance, CEO succession, succession planning, succession planning myths, board of directors

JEL Classification: G3, G30, G34, G39, M10, M12,

Suggested Citation

Larcker, David F. and Miles, Stephen and Tayan, Brian, Seven Myths of CEO Succession (March 19, 2014). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP-39. Available at SSRN: https://ssrn.com/abstract=2411669 or http://dx.doi.org/10.2139/ssrn.2411669

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Stephen Miles

The Miles Group (TMG) ( email )

630 Fifth Avenue Suite 3210
New York, NY 10111

HOME PAGE: http://miles-group.com/

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
531
rank
50,506
Abstract Views
2,435
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information