Our Blog: The Podium

Getting Investors Ready For Your New CEO

By Maureen Wolff, President and Partner

When The Men’s Wearhouse dismissed George Zimmer, the company’s high-profile pitchman and executive chairman, this summer, observers were left wondering what had caused the split. The company announced it had parted ways with Zimmer, who founded The Men’s Wearhouse in 1973, on June 19, five hours before its annual stockholders meeting was scheduled to take place. It provided an extensive explanation from the board of directors via press release – six days later. In the interim, and for several days thereafter, fans of Zimmer and his iconic commercial appearances took to social media with cries of “foul.” Zimmer himself commented on his ouster through a number of media channels.

Zimmer’s split must have been particularly damaging from a communications and branding perspective. After all, it is difficult to even think of the men’s retailer without hearing Zimmer and his classic phrase, “You’re gonna like the way you look. I guarantee it.” But the travails of communicating succession aren’t limited to high-profile executives. In the past several weeks, we have seen changes or controversy at the top of a number of public companies, including J.C. Penney, Microsoft, Office Depot, Royal KPN and Vivendi.

Finding the next CEO or chairman is one issue. Communicating to investors that the board of directors has a sound plan for succession is quite another entirely. This means the challenge is two-fold: overcoming the stigma associated with internal succession discussions while a CEO – especially a successful one or a company founder – is still in place; and crafting a message that will ultimately calm investor fears about uncertainty caused by a pending transition.

Let’s be clear: Nearly any change of chief executive, whether unexpected or planned for several years, will cause at least a small amount of discomfort for investors and other stakeholders. But communicating the change poorly, or failing to have an established succession plan, creates the potential for a firestorm of uncertainty to engulf even an outperforming company in rumor and speculation.

So, to help prevent that, here are five steps you can take in communicating an executive leadership succession plan.

1) Have a plan – By far, the best step a company can take in communicating succession is to have a comprehensive succession program already in place. According to a 2011 report by Deloitte, 85% of boards at companies with succession plans review those plans at least once a year. McDonald’s reviews its plan at every board meeting. At the same time, only 61% of public companies have any CEO replacement plan at all, according to Korn/Ferry International. Won’t it be much easier to communicate the company’s plan for replacing its CEO if a plan actually exists?

2) Make it public – Once your board of directors has determined the CEO’s successor, you should plan to issue a press release outlining the logistics and reasoning of the plan, as well as the qualifications and experience of the positions directly affected. WEX Inc., a payment solutions company in Maine, made its plan public in May, a full eight months before it was to take effect. It said it was doing so to “ensure a seamless transition” and enable the executive team to “maintain its focus on executing” the company’s strategy.

3) Don’t skip the details – There isn’t much point in announcing a succession plan if you don’t say what is actually in the plan. According to The Conference Board’s review of S&P 500 succession announcements last year, there are six points most companies emphasize: when the succession will occur; why the CEO is leaving; whether the incoming CEO will also be named chairman; a statement by the lead independent director or chairman supporting the incoming CEO and thanking the outgoing CEO; a statement from the new CEO; and a description of the incoming CEO’s qualifications.

4) Introduce the CEO-in-waiting – To gauge Wall Street’s reaction to a succession plan, the most successful companies introduce the chosen successor well before he or she takes the mantle of CEO. This accomplishes two goals. 1) It helps take the temperature of the Street and establish the prospective CEO’s credibility. 2) It builds the candidate’s comfort level with the public without the burden of ultimate responsibility, something even experienced CEOs can appreciate.

5) Remember humanity – Qualifications and past successes are critical in selecting a new CEO, but they aren’t all-encompassing. Relate those prior experiences to the company’s needs, making the incoming chief’s resume directly relevant to the company’s current situation. As focused as investors are on the facts, they also will want to know the backgrounds and values of the person the board has selected to oversee their investment.

The more we think about succession planning, the more we understand how much planning there is to communicate. By walking through these five steps, you’ll be off to a great start in effectively communicating that plan.

Maureen Wolff is president and partner at Sharon Merrill. Maureen leads the implementation of the firm’s strategic vision and provides high-level strategic counsel to clients. She is a past chairman and board member of the National Investor Relations Institute (NIRI) and a current member of NIRI’s Senior IR Roundtable. She is a trusted advisor to CEOs, CFOs and boards of directors on critical communications issues including corporate governance, shareholder activism and proxy contests, CEO succession planning and disclosure issues.

Subscribe to our weekly email: Investor Relations Around the Web

Disclosure, Board Communications, Succession Planning, Board of Directors, Shareholder Communications, Investor Relations

Subscribe to The Podium!

Connect with your Investors

Establish a sincere connection with investors to communicate key messages during your Investor Day. Download our free e-book on effective presentation habits, and learn to deliver ideas with confidence and clarity.

Delivering Effective Presentations

When it's time for a change

Whether planned or sudden, it is crucial to communicate the succession of high-profile positions effectively. Download our three-part e-book and learn the best way to craft a plan for CEO, CFO and Board of Directors transitions.

Download Your Free eBook: Communicating Management Transitions 

Be Proactive, Not Reactive

With our new Proxy GamePlan, we create a year-round, data-driven strategic roadmap for effective shareholder engagement. Implement a best-in-class program rooted in a deep understanding of your company’s proxy practices, shareholder voting trends and peer landscape.

Learn More About Proxy GamePlan

Find Effective IR Counsel

Whether you’re seeking external IR counsel for the first time or evaluating your current provider, you need a firm that understands your strategy, adapts to your culture and tells your story. Download our free guide on how to assess the effectiveness of an investor relations firm.

How to Assess  an IR Firm

Activism Defense

No company is immune to shareholder activism. Sharon Merrill helps boards of directors and executive management teams identify the activist red flags lurking in your shareholder base, assess your governance risks and develop an action plan to prevent, detect and neutralize any threats. Download our free white paper, “Leveraging Institutional Shareholder Relationships to Reduce Activism Risk,” and learn how the best defense against activism is a strong offense.

Download Activist Defense White Paper

Captivate your Audience

Speaking persuasively is critical in today’s competitive business environment. Effective speakers use voice techniques and body language that project authority and credibility. Download our free e-book, “A Guide to Delivering Captivating Presentations,” for insight into good -and bad- presentation habits, and learn how to improve your skills.

Become a Persuasive Speaker 

Perceptions Matter

How do you ensure that investors clearly understand your strategy, growth drivers and market position? The most effective way is through a perception study. By periodically taking the investment community’s pulse you can avoid the knowledge gaps and misperceptions that hurt valuation. Download our free whitepaper, Why Perceptions Matter, to learn more.

Download your free copy of  'Why Perceptions Matter' 

Common Topics:

More topics