Comment, en tant que fiduciaires et stratèges, les membres des conseils d’administration doivent-il aborder l’enjeu le plus critique de la gouvernance : La relève du président et chef de la direction PCD (CEO). C’est un sujet difficile et délicat, un sujet qui requiert toute l’attention des administrateurs, notamment de son comité des ressources humaines.
L’article dont il est question dans ce billet est basé sur les résultats du Global Strategic Leadership Forum qui s’est tenu à Atlanta en 2013 et qui a paru dans le Harvard Law School Forum on Corporate Governance.
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The World Affairs Council of Atlanta’s 2013 Global Strategic Leadership Forum focused on a critical issue facing boards of directors: CEO succession. As arguably its most crucial responsibility, the board’s process for hiring and developing CEOs must be an extraordinarily thorough one that addresses the complexities of the modern global company. While there is no exact template that fits all circumstances, the board must ensure that its processes and oversight accurately reflects the organization’s future needs, identifies the skills and experience required in today’s complex global economy, and builds and closely monitors a truly robust succession plan.
The critical questions include the following: How can the board best identify what the company most needs and match a candidate to meet those needs? Who among the CEO candidates is most capable of driving the company to greater growth and performance? What are the necessary attributes, contextual experience, and values that will drive effective, positive change in the company and in the industry? Of course, a company’s specific position in its industry and its own history are important distinctions that will impact the answers to these questions. All of these topics must be viewed in the context of the escalating risk factors and competitive forces facing all companies not only in the United States, but in other countries around the world, especially in emerging market countries.
The responsibility of the board with respect to CEO succession is a part of the board’s increasing engagement in corporate strategic decision-making and broad operational focus. Because CEO selection and monitoring is carried out in the context of the company’s risk position in all its markets, the board and the CEO should be in full agreement as to the risk appetite of the company, where the company is heading, and how it plans to get there—understood in terms of the short, medium, and long-term strategic horizon.
The Process of CEO Succession is Ongoing
While the search and selection of a new corporate leader is a major event in a company’s life, in fact the CEO succession process is not a time-limited event. Rather, it must be an ongoing process of development and discernment that is constant and systematic, driven by the company’s strategy and core values, and involving the intentional engagement of all of the board members. As boards are becoming increasingly engaged in forming the strategic trajectory of the company, they also are coupling this focus on a longer-range view of CEO succession. Connecting these two principal board duties influences the defining of CEO attributes that will support the implementation of the long-range strategy. The CEO succession process must be seen as an integral part of the broader leadership and talent identification, development, and monitoring system within the organization. Although the board’s legal responsibility resides in selecting and overseeing the work of the CEO, it has an implied responsibility to ensure that a management development system provides a clear way to identify and nurture potential corporate leaders, including a pool of potential CEO candidates. While an outside search for a CEO is also a proven pathway for CEO selection in certain circumstances, the majority of new CEOs emerge from inside the company and, hence, should come out of an established leadership development program….
The Inside/Outside Choice
The company’s current strategic position almost surely will influence the board’s decision on whether to seek a candidate for CEO from inside or outside the company. There are some circumstances in which the board may perceive a real need to find a CEO who can address internal matters of culture and motivation and that may require a different skill set from the previous or current CEO.
While there is a substantial literature on the board’s decision to focus either inside or outside the company for a CEO, there is a broad consensus that the inside candidate is preferred if the company is performing well. The outside candidate may be better if the company is not meeting its strategic objectives or if the company’s competitive position in the industry is not meeting the board’s expectations. While an inside candidate may know the corporate culture quite well, in certain circumstances, including a need for major strategic change, the CEO may need to be an inspirational change manager, a “refresher” for the corporate culture, and a motivator….
Attributes and Values of the Exemplary CEO
As the board evaluates potential CEO candidates, it should systemically and constantly refine the list of specific attributes that the future CEO should possess. Clearly, most boards want a CEO candidate who is a strong leader, who is capable of a high level of critical and holistic thinking, has unquestioned integrity, courage to act, and who perceives the necessity for innovation in products, services, and stakeholder engagement. Four principal attributes at the top of any board’s list should be: operational ability, strategic outlook, congruence with the corporate culture, and a high level of social and emotional intelligence. In all interactions, the CEO must be able to listen and learn, be open to a variety of opinions in his or her approach to decision-making, and operate well under stress. Candidates’ attributes and the board’s evaluation criteria must include the ability to handle key relationships with three “masters” in mind: customers, shareholders, and employees. The board must evaluate the potential CEO’s track record in dealing with these three key, yet very different, constituencies. While these constituencies are not involved directly in the selection process, the CEO candidate’s knowledge of them and how to strengthen ties to them should be a primary consideration in the final decision.
More than ever, the essential attributes list will include an excellent understanding of finance, including a keen ability to articulate where the company’s value is being produced, its capital structure, cost dynamics, asset utilization, and any potential resource gaps. A thorough comprehension of global financial markets is increasingly vital. Moreover, a strong financial fluency will allow the CEO to speak effectively not only with the CFO, but also with analysts and institutional investors.
Beyond industry knowledge and operational acumen necessary to lead an enterprise in a globalized market, today’s CEO must be able to have a full grasp of a wide range of issues including the drivers of the global economy, the complexity of the regulatory environment wherever the company is operating, enterprise risk management including political risk and cultural differences, corporate growth strategies, and current or potential acquisition or merger targets. A major category of concern to any CEO is compliance with the U.S. Foreign Corrupt Practices Act, which absorbs a lot of international companies’ corporate resources and must be managed carefully—especially in an era where the rise of whistleblowers, including the malicious ones, is a reality.
All CEOs must have a capacity to look forward, to envision what the future in the industry will look like, and anticipate, to the extent possible, the political and economic developments that may impact the company’s operations and performance. Global fluency and cross-cultural competence are essential ingredients for today’s CEO and some companies look very favorably on candidates who speak languages in addition to English.
Where CEO succession most often goes wrong is when there is not a good cultural fit, when the board uses the wrong metrics for evaluation, when the board does not know the candidate well enough, or when it fails to discerns how the candidate will react in specific and stressful situations. The candidates’ ethics and values must be clearly understood not only on their own, but also in the framework of the corporate culture.
Another critical dynamic in the selection of the CEO is to ensure that the candidate understands the impact of digitalization and the emergence of “big data” on his or her industry and company. Increasingly, the CEO must have a fulsome understanding of technology, especially those technological developments that are or will be impacting the industry….