World’s Largest Firms Failing on Succession Planning Disclosures

Garnet Roach of IR Magazine covers SquareWell’s inaugural study on CEO dismissals and appointments. As found in the study, seventy-three of the world’s largest companies saw a CEO change between January 2019 and June 2020, but firms are failing when it comes to reporting around succession planning. SquareWell finds that just a fifth of companies provide comprehensive disclosure of their succession plans, while 85 percent fail to provide ‘adequate disclosure about how the new lead executive was selected’.

‘In the area of succession planning, this has always been a highly sensitive topic,’ Luca Giacalone, senior ESG analyst at SquareWell told Garnet Roach at the IR Magazine. ‘CEO successions have been traditionally surrounded by a culture of secrecy, with companies keeping names of potential successors secret until the announcement of a new appointment is made.’

Luca adds that while it’s understandable that companies might want to keep the process confidential, ‘companies might be misinterpreting investors’ expectations. While investors do expect clarity on the succession-planning process, they understand the sensitivity of CEO succession and do not expect companies to provide detailed information on the state of succession planning. ‘What investors are interested in is evidence that the board is carrying out this key responsibility effectively – and that it is ready to ensure a successful transition.’

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