Investors Identify Their 7 Top Concerns Relative to Succession Planning

Jan 29, 2010, 08:30 ET from Integral Advisors, LLC from ,Board Advisor , LLC

CHICAGO and NEW YORK, Jan. 29 /PRNewswire/ -- A new study has identified seven top investor concerns relative to CEO succession planning.  The study, consisting of twenty interviews with various players in the investment community including investment analysts, institutional investors, investment banks, private equity, activist funds and rating agencies was conducted by Integral Advisors, LLC and Board Advisor, LLC from October, 2009 to January, 2010.  The study was prompted by the Securities and Exchange Commission's change in position relative to shareholder proposals on CEO succession planning last October amidst widespread criticism of Bank of America.  "CEO succession planning has become an increasing concern to investors because of its impact on shareholder value," said Beverly Behan of Board Advisor, LLC, "We wanted to understand what investors viewed the greatest risks in this area."

The seven factors include items such as "Key Executive Exposure" – the significant risk inherent in succession planning for a founder or iconic leader that necessitates far greater planning on the part of the board.  Bench depth was another area of concern, as were issues relative to the board's engagement in the succession planning process.  "The seven factors identified through the study forms the basis of a Succession Risk Index that we can use to gauge whether a company has high or low risks in each of these key areas of investor concern," noted Bruce Sherman of Integral Advisors, LLC, "This can be an extremely helpful tool for a board to understand their risk exposure on succession planning from the investors' standpoint."

Other notable information derived from the research includes:

  • Private equity firms, which tend to focus on "quality of management" more than succession planning, derive much of their intelligence about management quality and "bench strength" from dialogue with other executives within the industry who know the company and its top people through their business dealings.
  • Institutional investors note that proxy and other disclosure on succession is typically minimal, boilerplate or non-existent. They review the tenure of the senior team – and its turnover – from proxy data but primarily rely on their discussions with board members to form impressions of how effectively the board is addressing succession issues at the company.  The LIUNA pension fund – the most aggressive of all institutional investors to date in the area of CEO succession planning – has actually sent letters to the boards of dozens of companies that they invest in seeking details on their CEO succession planning efforts.  
  • Analysts – including Moody's, Standard and Poor's and Risk Metrics – include succession planning factors in their ratings.  

About Integral Advisors, LLC

Integral Advisors, LLC, is an independent management advisory specializing in executive talent strategy and succession planning. Integral provides consultation to investors, owners, boards of directors, CEOs and CHRO's seeking unvarnished information to optimize executive performance, mitigate enterprise risk and help shape the direction of the company.

About Board Advisor, LLC

New York-based Board Advisor, LLC focuses on making boards a significant asset to the companies they govern and developed strong expertise in CEO succession planning because it is one of the most critical and impactful areas of board decision-making.

For more information on the study and Succession Risk Index© please visit or

SOURCE Integral Advisors, LLC; Board Advisor , LLC