What would happen to a company if the chief executive fell under a bus, crashed a motorbike or suffered a sudden fatal accident?
It is a question that UK regulators will address when they signal tougher guidelines on succession planning among Britain’s biggest companies in a discussion document to be published soon.
The Financial Reporting Council (FRC), which is responsible for overseeing corporate governance in the UK, wants to make sure companies are prepared for departures, which can sometimes hit performance.
The regulator launched its inquiry last year with a view to changing UK corporate governance code guidelines that cover succession.
David Styles, director of corporate governance at the FRC, said: “Succession is an important element of good governance for any company.
“Companies need to be prepared for a sudden departure of the CEO but it is not just at the CEO level where succession is important. There should be planning at non-executive and middle management level as well.”
The FRC inquiry followed investor criticism of retailer Tesco for leaving the post of financial director vacant for several months and at one stage only having one person on the board with retail experience.
Some other companies were also singled out at the time for lacking experience on the board in certain core areas of their business.
The problems of succession at CEO level are often associated with founders, who are so closely linked to their company that it is difficult to imagine how the group would be run when they finally leave.
The FRC wants to make sure companies have a clear and consistent policy. Current guidelines say a company should have plans in place for orderly succession to maintain an appropriate balance of skills and experience.
Our specialist team at JW Hinks have many years’ experience in helping individuals and businesses devise comprehensive plans for their future and can provide guidance in this area.