The Advisors' Blog

We tend to cover CEO succession planning less on this site and more on TheCorporateCounsel.net, as a full board governance issue – in fact, we have a full “CEO Succession Planning” Practice Area over there. But this Pay Governance memo is interesting in that it highlights the greater role that some compensation committees are playing in this key responsibility. Here are the key takeaways:

• Succession planning has become a core responsibility of compensation committees, as boards increasingly oversee broader human capital matters amid persistent market volatility, deeper regulatory scrutiny, and rapid industry change.

• CEO succession among Russell 3000 banks reflects a predominantly planful talent pipeline, with approximately two thirds of CEOs hired from COO or President roles – positions often intentionally structured as stepping-stones to the top job.

• External hiring serves as a targeted complement to internal succession planning, often through former CEOs or M&A related appointments, reflecting a flexible approach to selectively augment internal pipelines with high potential external talent where strategically appropriate.

• Boards and compensation committees across industries should consider the approaches – such as succession planning cadence, incentive design for “CEO-in-Waiting” roles, and targeted development investments in COOs/Presidents and other executive pipelines – that encourage greater proactivity, streamline succession processes, and strengthen long-term leadership outcomes.

• Compensation committees can deploy a suite of succession linked pay tools – including pre CEO retention RSUs, pre approved compensation step ups, and promotion awards – to support continuity, reduce flight risk, introduce pay certainty ahead of transition, and reset long term incentives in a manner that aligns incoming CEOs with enterprise wide accountability.

– Liz Dunshee