What is a board succession planning policy?
The core legal document that characterizes the structure and operation of the governing board is the bylaws. Various board policies are often part of the bylaws and policies can also stand alone.
Boards agree to accept certain standards that guide their work and encapsulate such standards in official policies. Board policies are essential components of the board handbook, which is of great value especially for new board directors, who may be unfamiliar with legal requirements and the board’s expectations.
A policy for a board succession planning outlines the process that boards and committees need to use for planning to replace board members, a board chair and executive directors, either because of an existing vacancy or to plan for the future vacancy of a position.
What Is a Board Succession Planning Policy?
PricewaterhouseCoopers conducted a survey in 2012 that showed that 40% of board directors believed that at least one of their fellow board directors should be replaced. In addition, the survey indicated that only 46% of the respondents felt that their boards were sufficiently prepared for an unplanned succession or emergency. There are many reasons for boards to pursue succession planning, including:
- It sets them up to obtain the top talent.
- It prevents groupthink on the board.
- It ensures a diverse board composition.
- It maintains the balance of institutional knowledge.
- It enhances trust with shareholders and stakeholders.
- It maintains the balance of power on the board.
- It ensures that shareholders and stakeholders will be unaffected by changes in leadership.
It’s important for boards to have a board succession planning policy so that board directors know that they’re expected to work actively on board succession planning on a continual basis. Diligent Corporation provides board portal software and governance solutions to assist boards with developing succession planning policies and succession plans. The portal offers a secure space for electronically storing important documents for succession planning and all of the other critical board documents.
Sample Template for Board Succession Planning Policy
The following illustrates a fictitious sample template for a board succession planning policy:
ABC MULTICULTURAL CENTER
SUCCESSION PLANNING POLICY Policy #0000004 Position for Succession Planning: Vacant Board Seat Author: Board of Directors Board Succession Planning Policy It’s inevitable that board member seats will become vacant periodically. In the interest of board continuity, the ABC Multicultural Center establishes this policy to prepare for vacancies on the board, whether they are planned or unplanned. The board of directors shall be the primary group that’s responsible for implementing the board succession planning policy and any related procedures. The board of directors created this policy to ensure that there is adequate time to make sure that future board directors will be qualified, capable, and be a good fit with the mission of the organization and will commit to its vision, values, goals and objectives. It is the policy of the ABC Multicultural Center to develop a diverse roster of board director candidates on a continual basis. Procedures
- The Nominating and Governance Committee should actively seek and vet appropriate candidates for board directorship on a continual basis.
- The Nominating and Governance Committee should collect resumes for consideration on a continual basis.
- The Nominating and Governance Committee shall not seek the assistance of a third-party consultant for the purpose of recruiting board members without the approval of the board.
- The Nominating and Governance Committee shall refer to the board director job description and board member expectations in seeking qualified candidates for board directorships.
Board Succession Planning Leads to Organizational Success
The trademark of a successful organization lies in its ability to secure and enlist the best board and executive leadership talent available who are capable of operating in the current environment and are well suited to navigate the challenges that the future is certain to bring.
Boards provide the necessary collection of expertise to guide senior executives when the environment necessitates a change in direction, or the organization enters new business activities, expands or changes in some other significant manner.
Boards shouldn’t view succession planning as a burden or a waste of time. Effective, well-functioning boards have a composition that includes diversity in age, gender, ethnicity, experience, skills and backgrounds. This diversity is necessary to bring a multitude of perspectives into the boardroom, which will ultimately set the stage for the best possible decision-making.
Research conducted by executive search firm Spencer Stuart shows a strong connection between some amount of board turnover and positive organizational performance. Institutional investors tend to share the view that occasional board turnover is good for business.
A strategic approach to succession planning will inevitably result in a solid board composition that works efficiently and effectively. Keeping the focus on this goal should encourage boards to welcome succession planning activities rather than resist them.
Boards can’t consider themselves progressive unless they work toward a board composition that can adequately manage the strategic priorities of the organization and appropriately address the diversity and range of the stakeholders.
It’s also worth mentioning that such issues as aging board directors and increasing pressures from shareholders and stakeholders should be motivating boards of directors to re-evaluate long-standing philosophies and to work toward reinventing standard approaches to strategic planning and oversight. For the board role to remain relevant, boards will need to evolve with the rapidly changing environment.
Concluding Thoughts About Board Succession Planning Policies
Boards should be aware that while board policies are important, the bylaws take precedence over all other institutional documents. In the flurry of board duties, it’s easy enough for boards to overlook routine matters, such as reviewing and updating bylaws and board policies.
Being busy doesn’t negate the importance of addressing such important matters. Boards often delegate the responsibility for updating the organization’s bylaws and policies to their nominating and governance committee. While this is the norm, it’s also important for board succession planning committees to periodically review their own policies and charters to ensure that succession planning activities are current and that they’re consistent with laws, regulations and the board’s needs.
In essence, board succession planning should be proactive and rigorous so as to identify and secure the best possible board to oversee the organization.