Should You Be Paid to Find Your Successor?BondBeebe
Posting by Joel C. Susco, CPA
Recently I read an interesting article from The Wall Street Journal titled “The Hottest Corporate Fad: Pay CEOs to Find Successors.” What a novel idea, particularly for a family-owned business! According to the article, sixteen Fortune 1000 companies have indicated that there is a direct link between the top executives’ performance awards and their establishment of a true succession plan. In addition, the article goes on to say that this number will grow rapidly in the next few years. According to some experts, it may triple over five years.
Board members believe that “continuity of management is critical.” The transition from one CEO to another can make or break an organization. Intel awarded their CEO, Paul Otellini, $4 million in stock and cash, in part, because Otellini helped groom his successor, Brian Krzanich.
As the old adage goes, nothing is forever, and chief executives know that they cannot stay with an organization in perpetuity, but most still resist the notion of succession planning. In many family businesses, the CEO stays in his/her position much longer than prudent. This can occur for many reasons, including a lack of trust in the next generation or a desire to avoid conflict and tension.
As a CEO, leaving underlying problems to resurface after you pass will only create succession issues for the surviving family members. If you can implement a plan early and share that plan with your family, any issues can be discussed as they arise.
A more robust wallet may not be a viable incentive for you, but it is an interesting concept. You may not be running a Fortune 1000 company, but finding a way to ensure an orderly transition for your business should be a priority as you look to achieve goals for both your business and your family.