TheCorporateCounsel.net

Last week’s departure of Chipotle CEO Brian Niccol to assume the CEO role at Starbucks is a high-profile example of how CEO transitions can come at you fast. It also illustrates the need for corporate succession plans to address the possibility of unexpected transitions. Meridian Compensation Partners recently published an article outlining its views on the three keys to successful CEO transition planning.  This excerpt discusses the unexpected resignation scenario and the key components that should be incorporated into a succession plan to address it:

Resignation (or Medical Emergency): This scenario often comes with little warning. This is the area where the company’s emergency succession plan should come into effect immediately. This plan should address:

― Communication: Appropriate internal and external messaging.

― Interim CEO: Appointment of interim leadership (sometimes a qualified board member, an executive who can be a steady hand during a CEO search, but who does not aspire to the CEO role and in those rare ideal cases, an internal, ready now candidate).

― Open Incentive Cycles: Treatment of open cycles can be impacted by the circumstances that gave rise to the resignation balancing formal provisions with judgments around whether conservatism or magnanimity are best suited.

― Search Process: This should be based on both pre-existing internal candidates’ development plans and an “evergreen” list of external candidates.

The article also points out the need to address the retention risk among disappointed CEO candidates associated with selecting a new CEO through an internal promotion or an external hire, as well as the need for boards to understand market compensation and other key employment terms in advance of an external search or an internal promotion.

– John Jenkins