Investors felt further misled by the company through its muddled communication of the vacancy, with some investors still assuming McIlwee was still advising the company months after his departure.
Take for example the retailer Tesco, who came under fire from investors last year after leaving its financial director post vacant for several months after the contentious departure of its former CFO, Laurie McIlwee. Thus, not properly communicating your succession plans will certainly contribute to this uncertainty. The one thing above all others that investors dislike is uncertainty. Then there are the less visible costs of “uncertainty” – mounting investor uncertainty, organisational uncertainty, the uncertain outcomes of growth initiatives and closure of deals and, moreover, the uncertainty of the viability of the company’s culture and future performance. There are the foreseeable costs – the seven-figure severance package, the retainer for an executive search firm, the cost of emergency board meetings, communications consultants and employment lawyers. Not many people directly correlate costs with succession planning, but costs can quickly escalate when a key leader of a company departs suddenly without an obvious internal replacement.
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The FRC may also consider changes to the Code on how the nomination committee can play a more effective role in a company’s succession strategy and talent management. They will publish a paper later this year after collecting responses from some of the UK’s most prominent companies. The Financial Reporting Council (FRC), who oversees the UK corporate governance code, is considering tougher guidelines for companies to provide more meaningful disclosures on their succession plans. The quality of the boss is one of the most important aspects for the success of a company, one investors closely monitor and one that is gaining more scrutiny from regulators. But who will take on the corporate helm before you can take on the boat’s helm? You think it’s time you bought a boat and sailed to Greece for a much deserved retirement. You’ve been running the company for 25 years and to be honest, it’s getting a little old. Why good communication of succession planning is important Posted in Reporting on 29 February 2016 By Kay Kayachith, Reporting Consultant
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