Having an effective, highly qualified CEO is critical to the success of a company’s operations and, ultimately, to the success of the company’s mission. One of the first and foremost responsibilities of boards of directors is hiring a CEO and setting the individual’s compensation. The board has a fiduciary responsibility to review and monitor the CEO’s performance and either reward or replace the CEO accordingly.
Under the best-case scenario, the CEO is doing a stellar job and gives the board of directors several years’ advance notice of impending retirement plans. The worst-case scenario is losing a CEO with little notice because of an illness, injury, death, or for failing to meet the job’s expectations. Best practices for succession planning assume that boards have a plan in place to replace the CEO whether the loss is planned or unplanned.
A CEO Succession Planning Template Paves the Way
A CEO succession planning template provides a detailed roadmap from recruitment to appointment that paves the way for boards to hire a CEO.
While a CEO succession planning template gets boards off to a good start, board succession committees must customize their CEO succession planning template to account for the company’s unique needs, size, corporate culture, competitive stance and strategies.
A board portal is a valuable tool to help create a CEO succession planning template to assist in the process of navigating a successful leadership succession plan. With the high level of safety that a Diligent board portal provides, succession plans will remain confidential. Diligent Messenger is a highly secure communications platform that’s perfect for the executive committee, the search committee and the board to collaborate on the CEO succession planning template so that it works now and in the future.
Overview of the Executive Search Process
The executive search process requires the involvement and commitment of several committees and individuals. The process requires the collaboration of the board’s executive committee, board of directors, search committee chair and search committee. The search committee chair and the committees each have specific roles, tasks, responsibilities and levels of authority.
Responsibilities of the Executive Committee of the Board of Directors
The inception of a CEO succession planning template begins with the executive committee of the board. The executive committee selects the search committee chair and the committee members.
In addition, the executive committee bears the responsibility for establishing and approving a compensation plan that’s in line with compensation trends and meets the needs of the organization. The executive committee is responsible for developing a policy to review the CEO’s compensation plan periodically.
As shareholders expect an executive’s compensation to align with performance, the executive committee is responsible for establishing short- and long-term performance objectives for CEOs, including an initial 90-day review and annual performance reviews. By virtue of the resolution of the board of directors, the executive search committee delegates the responsibilities for conducting the actual search to the executive search committee.
As the search process winds down, the executive committee works in conjunction with the search committee to decide to which candidate to offer an employment contract. The executive committee usually has an attorney review the final employment contract.
Responsibilities of the Board of Directors
As noted under “Responsibilities of the Executive Committee of the Board of Directors,” the board of directors provides the resolution for the executive committee to establish a search committee. The board is also responsible for approving any necessary policies to which the new CEO will need to adhere.
Finally, the board of directors ratifies the final candidate as outlined in the organization’s bylaws.
Responsibilities of Search Committee Chair
The search committee chair is usually served by the chief elected officer or officer-elect. The search committee chair is responsible for providing leadership to the search committee and convening meetings with the search consulting firm and the search committee. As the main liaison, the search committee chair is the primary contact for the search committee, the search consulting firm, the board, and the CEO or interim CEO.
Responsibilities of the Search Committee
The composition of the search committee should be carefully chosen due to the importance of their duties. The executive committee should seek to appoint search committee members that have the time to be fully engaged in the process because the duties are brief but intense. Search committee members need to have the qualities of being honest, fair and open to all candidates and should be fully committed to the process and the outcome. The members of the search committee should not have any conflicts of interest and should be willing to be forthright during deliberations. It’s common for executive search committee members to be willing to sign a confidentiality agreement, agreeing to keep the search committee’s work private until the board makes an official announcement of the appointment. Additionally, search committee candidates must agree to follow the established search guidelines and policies and to accept the final decisions of the search committee and the board.
The CEO search committee reports to the chief elected officer of the executive committee. A search consultant is often enlisted to lead the activities of the search committee in a progressive manner.
The responsibilities of the search committee include creating a job description and announcing the position. After pre-screening candidates, the search committee conducts the initial in-person interviews. Once narrowing the prospects to a short list of potential candidates, the search committee collects additional information, checks references, and performs background and credit checks.
Finally, the search committee selects the final candidate and presents the individual to the board of directors for ratification. The executive committee may also collaborate with the search committee on the potential CEO’s compensation package and employment contract.
In a perfect world, succession planning committees will have plenty of advance notice of a retiring CEO and be well prepared to conduct a massive search for the best candidate. Even if they have to find and hire a CEO on short notice, having a well-designed CEO succession planning template and a board portal can make doing the impossible seem possible. Using a highly secure board portal ensures that the CEO succession plans will remain highly confidential long after the board appoints a new CEO.