In the first few weeks of 2009, a number of corporate CEOs were sent packing. Seagate, Tyson Foods, and Borders Group were just some of the companies that announced changes at the top. Also, Apple chief Steve Jobs is taking a leave of absence for health reasons after months of speculation. More CEO changes are rumored to be on the way and may include some of the world's leading companies.
A company's reputation can be seriously tarnished if the succession issue is left unaddressed. In contrast, Best Buy, the nation's largest consumer electronics retailer, recently announced that Brian Dunn, its president and chief operating officer, would succeed current CEO Brad Anderson later this year. Dunn, a company veteran of more than 20 years, had been widely viewed as the heir apparent at Best Buy which has typically promoted from within. In addition to issuing a comprehensive press release regarding the executive changes, the company hosted a conference call for investors to introduce the new CEO.
In addition to a succession plan, companies need to have a communications program in support of a CEO transition - either planned or unexpected. Careful planning is essential to ensure that the transition is smooth and that all of the company's constituencies are addressed. Without a dedicated plan of action, what should be an orderly, well planned transition often turns into a crisis situation alarming virtually all of the company's constituents - employees, suppliers, customers, and, of course, investors.
We offer the following checklist:
o Orchestrate a graceful entrance, smooth departure - Your company's CEO may have held the position for many years and may have enjoyed a great degree of popularity with investors, customers, and employees, among others. While paying tribute to the CEO's accomplishments in the press release, present the rationale behind the choice of the new CEO. Your release should include a detailed bio of the new CEO and comments from the outgoing CEO as well your company's lead independent director.
o Involve the Board of Directors - Succession planning is often led by a member of the company's board who has had direct experience in such matters. He or she as well as other board members should be actively involved in the communications planning process as well.
o Crisis planning is critical - CEOs can leave (or be asked to leave) for a variety of reasons. Hopefully, your company's board of directors has a succession plan in place. Working with the corporate communications/investor relations functions, management should prepare a crisis communications plan that addresses various contingencies pertaining to an abrupt and unexpected CEO departure and how the matter will be communicated.
o Be proactive in addressing rumors - Rumors spread quickly and become “institutionalized” and accepted as fact and could result in a loss of market value. Given today's 24/7 news reporting as well as the rise of the citizen journalist, be prepared to address rumors quickly and in a forthright manner.
o Prepare the CEO-in-waiting - Often incoming CEOs have had little or no interaction with the media and the investment community. Time permitting, your CEO should undergo media training and be subjected to mock interviews conducted by members of your corporate communications and investor relations teams.
o Introducing the new CEO - Shortly after the change is announced, the new CEO – whether selected from within the company or outside the company – should be introduced to various constituents. Informal phone calls with the company's institutional shareholders and sell-side analysts should be arranged, followed by in-person meetings, once the CEO has had a chance to settle in to the new job.
o Build employee support - Schedule opportunities for the new CEO to meet employees in Town Hall meetings at various corporate locations. This helps build employee morale and support for the incoming CEO.
o Utilize the media - Media interviews present the incoming CEO with the opportunity to set forth an agenda and strategic direction for the company. Even in troubled situations, interviews enable the incoming CEO to communicate with the company's various constituents to present a turnaround program.
The current economic downturn will undoubtedly lead to more CEO departures. As the CEO is often “the face of the company,” the company's standing and reputation will depend on how the issue is handled. To ensure a smooth transition, a communications program should be incorporated into your company's succession plan.
Gene Marbach is VP, Investor Relations practice at Makovsky & Company