CSP Board Governance & CEO Succession 2 — Questions and Answers
Question 1: Which board committee is most commonly tasked with overseeing CEO succession planning?
- Audit Committee
- Compensation Committee
- Nominating and Governance Committee (Correct answer)
- Risk Committee
Correct answer: Nominating and Governance Committee
The Nominating and Governance Committee typically has primary oversight responsibility for CEO succession planning as part of its governance mandate.
Question 2: What is the primary purpose of an 'emergency succession plan' for the CEO role?
- To permanently replace an underperforming CEO
- To ensure continuity if the CEO becomes suddenly unavailable (Correct answer)
- To prepare internal candidates for a planned transition
- To satisfy SEC disclosure requirements
Correct answer: To ensure continuity if the CEO becomes suddenly unavailable
An emergency succession plan ensures the organization can continue operating if the CEO becomes suddenly incapacitated, deceased, or otherwise unavailable without notice.
Question 3: When a board evaluates internal CEO succession candidates, what is the recommended approach to candidate development timelines?
- Begin development 6 months before the planned transition
- Maintain a rolling 3–5 year development horizon for top candidates (Correct answer)
- Focus development only on the single highest-potential candidate
- Delegate all candidate development to the outgoing CEO
Correct answer: Maintain a rolling 3–5 year development horizon for top candidates
Best practice calls for a rolling 3–5 year development horizon so that candidates gain meaningful experience across business cycles and diverse challenges.
Question 4: A board is selecting a new CEO during a strategic pivot toward digital transformation. Which criterion should weigh most heavily in this context?
- Tenure in the industry
- Track record of cost-cutting
- Digital literacy and technology leadership competency (Correct answer)
- Relationships with current major customers
Correct answer: Digital literacy and technology leadership competency
When the strategic direction requires digital transformation, the board must prioritize competencies aligned with that strategy, making digital leadership capability the most critical selection criterion.
Question 5: What does 'board refreshment' mean in the context of CEO succession planning?
- Rotating the board chair role annually
- Adding directors with skills aligned to future strategic needs (Correct answer)
- Removing all independent directors every five years
- Conducting annual board satisfaction surveys
Correct answer: Adding directors with skills aligned to future strategic needs
Board refreshment refers to proactively adding new directors whose skills, perspectives, and competencies align with the company's evolving strategy and future CEO oversight needs.
Question 6: Which disclosure requirement related to CEO succession is enforced by the SEC for public companies?
- Detailed internal succession plans must be filed annually
- Companies must name their top two internal CEO candidates in proxy statements
- Risk factor disclosures must address key-person dependence and succession risk (Correct answer)
- The board must vote on the succession plan quarterly
Correct answer: Risk factor disclosures must address key-person dependence and succession risk
SEC rules require public companies to disclose material risks, which can include key-person dependence; however, detailed succession plans themselves are generally not required to be publicly filed.
Question 7: How should a board handle the situation where the outgoing CEO strongly advocates for a specific internal successor?
- Automatically approve the outgoing CEO's recommendation as a sign of respect
- Use the recommendation as one input while conducting an independent assessment (Correct answer)
- Require the outgoing CEO to recuse themselves from all succession discussions
- Defer the decision entirely to an external search firm
Correct answer: Use the recommendation as one input while conducting an independent assessment
The board should treat the outgoing CEO's recommendation as valuable input but must conduct its own independent evaluation to fulfill its fiduciary duty.
CSP Board Governance & CEO Succession 2
Which board committee is most commonly tasked with overseeing CEO succession planning?