The Financial Reporting Council has published a revised version of the UK Corporate Governance Code. This has an impact on all companies, not least in terms of how best practice is viewed and in particular the focus on ensuring succession planning and boardroom accountability is at the forefront of the boardroom agenda.
The code supports
- The undertaking of externally facilitated board evaluations at least every third year.
- The Annual Election of Directors
- Highlights Gender as an important factor in making board appointments
- Increased emphasis on the role of Chairman
- The need for constructive challenge from Non – Executive Directors and the central role of the board in risk oversight
Benchmarking your board against recognised standards of best practice is a highly valuable exercise. Understanding the make up and talent of your board and senior management is crucial to the long-term success of the organisation. Yet according to a recent survey from Stanford University in the US more than half of those organisations questioned could not immediately name a successor to their CEO.
Worryingly only 50% of those organisations have a written document detailing the skills required for their next CEO and on average boards spend only 2 hours per year on CEO succession planning.
Only 54% of those surveyed are currently grooming a potential successor for the CEO. What does that say to employees or potential employees about the opportunities for progression and development and the room for ambition that exists in the organisation?
The UK would appear to be slightly ahead on the issue of succession planning. Not only has the change in the revised code meant that legislatively we are focusing on best practice.
As we move, albeit tentatively, out of recession, I am inundated with requests from customers in a number of areas, not least wanting independent evaluation of the performance of existing board members as well as looking to introduce new talent to their Non – Executive and Executive Teams to take advantage of improved market conditions and enhanced opportunity.
With strengthened balance sheets, many business are seeing now as the time to make the changes to take full advantage. This is confirmed by a recent report from the Association of Executive Search Consultants who highlight 67% of search consultants anticipating an increase in revenues in the second half of 2010.
Despite rising unemployment, organisations are reporting shortages of talent and retention issues, compounded by research that suggests the number of Executives open to a career move is up from 21% in 2009 to 45% in 2010. Those functions continuing to suffer from the greatest shortfall in talent are CEO, COO and General Manager with China India and Brazil experiencing the greatest scarcity of talent.
Succession planning is not something that should come as a footnote at the bottom of the board meeting agenda. It needs to be on the table now.