Columns
- The Board’s Strategic Role in Operationalizing Innovation
- When AI Algorithms Control Earnings Reactions
- Point/Counterpoint: To Go Public or to Stay Private?
- Why Mergers Fail When Strategy Is 'Right'
- Transforming Governance into a Growth Strategy
- How the Board Can Get the COO Position Right
- Beyond ROI: A Conversation with Purvee Kondal
- Onboarding
Director Advisory
- Human Capital Governance and the Compensation Committee’s Remit
- Strengthening Board Engagement as Volatility Tests Strategy
- Four Overlooked AI Signals Every Director Should Watch
- A Mid-Cycle Guide for Compensation Committees
- How Boards Influence Successful Carve-Outs
-
The Hidden Costs of CEO Succession
- Governing the Convergence of AI and Cyber Risk
Directorship Magazine
The Hidden Costs of CEO Succession
Key Points
- Poorly managed executive transitions erase about $1 trillion in market value annually across the S&P 1500, posing a significant but often unquantified risk for companies.
- Boards can mitigate the "ripple effect" of talent loss by aligning compensation strategies two to three levels below the CEO during the succession process.
- Successful succession planning should be treated as a continuous, multiyear strategic process rather than a reactive event triggered only by a looming departure.
This AI-generated summary, based on content on this page, was reviewed by NACD editors for accuracy.
CEO succession is often cited as a board’s most critical responsibility, yet research suggests that 40 percent of these transitions are viewed as failures within just two years. While the visible costs of a new hire are easily tracked, the "hidden" costs—ranging from the erosion of the leadership pipeline to massive shifts in market valuation—often remain invisible until it is too late.
By integrating pay decisions with talent bench scenario planning, boards can gain needed optionality. Discover the anatomy of a successful succession and how to safeguard your organization's talent one, two, and even three levels below the C-suite.
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R.J. Bannister is partner and chief operating officer of Farient Advisors.
Robin Ferracone is the CEO of Farient Advisors.
Farient Advisors is a NACD partner, providing directors with critical and timely information, and perspectives. Farient Advisors is a financial supporter of the NACD.
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