Note: This is the finale in our three-part series on succession communications.
As you’ve no doubt noticed from our previous posts on communicating CEO and CFO transitions, 
there’s no such thing as a “standard” executive announcement. And messaging board-level succession carries additional nuances you’ll need to consider as you frame a board change in the best position for long-term success with the investment community.
To assist in that effort, here are five points to guide you in announcing a change on your board.
1. Change is good. Change carries inherent uncertainty, and investors typically frown on that. However, institutional shareholders, and shareholder activists in particular, have emphasized board refreshment in recent years as a means of improving corporategovernance. Proxy advisers Glass Lewis and ISS also view it favorably. The theory here is that more frequent board turnover opens a company to new thinking and the best possible strategic benefits in the long run. Put another way, your board either can be stagnant or growing. Approach your announcement from a confident perspective, because chances are your shareholders will welcome the addition of new viewpoints.
2. Good ‘change’ is better. Although you may receive the benefit of the doubt when adding a new director or replacing a long-term board member, don’t assume the Street will share your excitement without some prodding. Provide a strategic rationale for the change, demonstrating the skills your company values that this member will bring to the table. If the new director’s background isn’t an obvious fit, you’ll need to connect the dots by explicitly stating why you appointed this person. The reasoning may be apparent to you, but outsiders may not understand at first.
3. Timing, timing, timing. Assuming you’re appointing a new member and not simply removing one, always emphasize the addition first. It’s always better to have an orderly process, so that you can focus on the strengths of the new person, rather than why the former member left. But you should explain the reason behind the departure, even if the transition is not controversial. Consider the juxtaposition of the announcement with a recent shift in strategy, a major acquisition or poor financial performance – anything that could be construed as driving the director’s departure. This is especially true if the director’s term was quite short – investors will look for answers if you don’t provide them. You’ll want to show the separation wasn’t driven by a disagreement about the strategic direction of the company. You won’t get any credit for appearing to be a firm in the midst of upheaval.
4. Accentuate the positive. Whenever possible, provide truthful, positive comments on an outgoing person’s tenure. This holds for any high-level succession. By providing a favorable “review” in public, you demonstrate to investors that the board is in a good position and that the changeover will be constructive. Supportive comments also enable both parties to preserve their reputations as they move on. If you’re making a director change because of an activist’s involvement, a positive message will be even more important. If you’ve been negotiating with the activist behind the scenes, the public message may be that you appreciate the shareholder’s involvement and look forward to their contributions. But if the board change is the result of a negotiated, public settlement, you still must say your company will work with the activist. Doing otherwise will create uncertainty for investors. As always, remember to announce board succession via a press release, not solely through the requisite Form 8-K.
5. The Replacements. Is it better to announce a replacement when a director departs? Absolutely. It shows this is not a sudden departure caused by a disagreement or poor health. It also demonstrates a methodical transition in which the company has a succession plan in place as part of its own governance. To understand better, here’s a counterexample. A company announces via press release that one of its directors is retiring, but it does not name a replacement or provide timing for naming one. Now, if you’re an investor, your first question is, “Aren’t they replacing him / her? What happened?” This is precisely the situation in which a change should appear orderly. If it doesn’t, you’ll only open your company up to more questions. The solution: Be proactive. Long before you need a new director, begin having an ongoing dialogue with your largest shareholders. These discussions will help you garner support for a board change when the time comes, and they will also provide you with opportunities to gather potential candidate names from your investors. Begin cultivating a list of potential board members, and have it ready in case of a sudden change.
Remember, a board transition usually should be perceived positively. Use this to your advantage by reminding investors what your strategy is and explaining how the new director will help you achieve your goals. Consider the timing of a board change to avoid associating the new director with recent adversity. You want this announcement to give investors reason for optimism, so put your best foot forward when discussing both the past and the future. A structured, deliberate process will position your company for success in the boardroom and with investors.
Maureen Wolff is CEO and partner at Sharon Merrill Associates. She is a National Investor Relations Institute Fellow, Senior Roundtable Member and Honorary NIRI Boston Director. 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.
