Succession plan can be critical :: Namibia Internet Gateway cc ::

Articles: Succession plan can be critical

Posted by admin on Tuesday, April 20, 2004 - 02:03 AM

The death of McDonald's 60-year-old chairman and CEO, Jim Cantalupo, on Monday points up one of the most critical issues facing corporations: succession planning.
Investor activists and institutional shareholders are demanding that boards of directors take a firm hand in planning for succession, even at companies where strong chairmen or CEOs have ruled for decades. And there are few industries where that is a bigger issue than among the major media companies. McDonald's won plaudits Monday for moving quickly to reassure Wall Street and employees by immediately naming a new management team. The reaction indicated that the board had an approved succession plan in place, says Paul Hodgson, senior research associate at The Corporate Library. Now even media moguls such as 80-year-old Sumner Redstone of Viacom and 73-year-old Rupert Murdoch of News Corp. — who have shown little public interest in the process — are being pressed to address succession. Redstone, who controls 71% of the voting shares of Viacom, has sent feelers to Wall Street that he's working out a succession plan with his board. Murdoch won't get specific on the issue, but his No. 2, President and Chief Operating Officer Peter Chernin, is increasingly viewed as his successor. Failing to manage the sudden loss of a leader can damage a company's performance, image and morale. Coca-Cola has yet to find its footing after the death of respected 65-year-old Chairman and CEO Roberto Goizueta in 1997. Successors Doug Ivester and Doug Daft have not been able to fill his shoes. A company does not even have to lose its top executive to be changed forever. Walt Disney Co.'s popular 62-year-old president, Frank Wells, died in a helicopter crash in 1994, and Disney CEO Michael Eisner has gone through a succession of executives to try to fill the void left by his No. 2. The inability, or unwillingness, of the 62-year-old Eisner — who in 1994 had emergency heart bypass shortly after the death of Wells — to develop a potential successor is viewed as one key reason shareholder activists were able to drum up a 43% withheld vote on his re-election to the board March 3. The board reacted by stripping Eisner of his chairman title. Boards should discuss succession planning at every meeting and develop strategies to both develop internal talent and keep an eye open for outside stars, says Patrick McGurn, senior counsel to proxy adviser Institutional Shareholder Services, which helped lead the shareholder revolt against Eisner. Referring to Cantalupo, he says, "You could not come up with a more compelling example of why you need a succession plan in place, if not a process. This is the No. 1 issue for institutional shareholders. If a board fails on this issue, then nothing else really matters."

· 136 Reads ·