Fifty-seven percent of CEOs and of board members said they had relatively little confidence that their CEO succession planning process was positioning the organization well for the future.¹ They were a bit more confident in the board succession process, though to varying degrees. 

These companies' lack of confidence in their ability to find the leaders they need, which we uncovered in a survey late last year, is a fundamental weakness. To find out how boards are planning today and how they are seeking to improve their effectiveness, we conducted a deep-dive follow-up survey. 

In this report, we will focus on the perspectives of leaders at companies traded on the public markets; a separate report will explore the notably different practices at privately owned companies. 

Succession is a low priority

Globally, only 28% of respondents said that CEO succession is among their top priorities and is treated as such. Given that CEO succession is one of two foundational responsibilities of boards, along with oversight of strategy and performance, this figure is notably low. At public companies, the news is a little better, but the share of respondents saying they are giving CEO succession top priority is still below half.

Larger public companies and independent directors make a difference

Only at the largest public companies, those with annual revenue over $1 billion, does the figure get above half—and then only to 54%.

Leaders at companies where an independent director takes the lead in planning (no matter what ownership structure the company has) far more often say they treat CEO succession as a top priority, at 44%, compared with 29% of those where the CEO or another executive director takes the lead.

Increasing investment

Despite this current priority level, boards are increasing their investment in CEO and board succession planning in response to recent trends affecting governance.² Many clearly see a link between the board’s readiness to address these trends and improved succession planning.

At public companies, 64% have increased investment, most often because the increased expectations of board directors require improved board capacity. Companies where independent directors take the lead more often say they’ve increased investment.

How boards are planning

Through our work with boards, we have identified a few steps leading boards are taking to improve their succession planning for themselves and for CEOs, including making planning a continuous, transparent process; ensuring they have an objective, wide-ranging understanding of both the internal bench and the external market; and putting in place clear performance metrics.

Open discussion

About two-thirds of leaders at public companies say discussions about CEO succession are encouraged, and just under half say the same about director succession. 

At companies where independent directors take the lead in planning, the shares saying discussion about CEO and director succession planning are encouraged are notably higher than at companies where executive directors take the lead.

Links to strategy

However, far fewer leaders at public companies take many steps to understand their leadership in the context of their strategy. 

Respondents at larger public companies far more often than those at smaller companies take many of these steps.

CEO succession process

Public company leaders are focused on reviewing internal CEO candidates fairly frequently: 79% say they do so at least once a year. They are far less focused on external options, with 72% saying they review those people rarely or only as needed (and there is little difference on this point between large and small public companies).

They do, however, tend to treat those candidates equally when they do consider them. For example, two-thirds say they use third-party assessments for both types of candidates. 

It is notable, though, that larger public companies and those where independent directors take the lead both more often than others use assessments consistently.

Board refreshment process

A majority of leaders say they regularly focus on director performance. Here, too, companies where independent directors take the lead and larger public companies are more often taking action and being transparent about results.

Far fewer large public-company leaders, however, say they regularly replace directors who aren’t contributing, just under a third.

Public company leaders say their board reviews external director candidates slightly more often than external CEO candidates, with 36% saying they do so once a year or more often compared with a quarter saying the same about CEO candidates. The share rises to 42% among leaders of large public companies.

Shareholder investment

Despite much attention being paid to increasing pressure on boards from mainstream and activist shareholders, half of public company leaders say shareholder input is limited to their voting authority in the proxy, with little difference between leaders at larger and smaller public companies. However, we believe the share of boards engaging routinely with shareholders on these matters is growing. 

Considerations for boards 

1. Given leaders’ low satisfaction with CEO and board succession planning, it’s good news that so many have increased their investment in it. If it’s not a priority at your board, is that because you’re satisfied with how things are working? If you’re not satisfied, why is it not a priority for your board? Are there political issues, such as the CEO or another director wanting to control the process? Does your board have longstanding traditions that impede change?
2. Leaders at larger public companies say they’re doing more. These companies are more often in the spotlight than smaller ones, but will smaller companies benefit from taking similar actions? What is the opportunity cost to their leadership pipeline if they don’t invest more?
3. When independent directors take the lead, succession processes have greater priority, investment, and openness. On your board, what is the role of independent directors? Would your company benefit if their role were expanded in this area?

About the research

In June and July 2024, Heidrick & Struggles fielded an online survey that garnered 1,702 respondents. Of those, 59% were CEOs and 75% had a board seat. Thirty-nine percent were in Europe; 39% in North America; 8% in Asia Pacific; 4% in Latin America; and 2% each in Africa, India, and the Middle East. Respondents represented companies of all sizes; 29% reported annual revenue of US $1 billion or more. Thirty-two percent have shares traded on a public market; 30% were backed by private equity or venture capital; 16% were family owned; the rest were social enterprises, state owned, or other ownership structures. Companies ranged across all industries. 

About the author

Jeremy Hanson (jhanson@heidrick.com) is a partner in Heidrick & Struggles’ Chicago office and a member of the global CEO & Board of Directors Practice.

References

¹ “CEO and board confidence monitor: A worried start to 2024,” Heidrick & Struggles, January 17, 2024.

² These include the growing influence of investors, employees, and other stakeholders; regulatory changes; and a widening risk environment marked by geopolitical and economic uncertainty. For more on leaders’ views on their current challenges, see “CEO and board confidence monitor: A worried start to 2024,” Heidrick & Struggles, January 17, 2024.