Succession Planning in Public Companies
An interesting article today in the WSJ (registration required) - All in the Family: Why Should Executive Posts at Publicly Traded Companies be Passed on Like Heirlooms? The article discusses the idea that many senior level positions at major public companies are filled with children of current leaders. According to Professor John Ward of Northwestern, "...such handoffs happen smooothly only about one-third or one-quarter of the time." Add to that the concerns recently about corporate governance and objectivity, and a slew of questions can be raised. Why should a controlling shareholder also serve as the CEO and then be able to pass the baton to their offspring? Are children really as qualified? The article goes on to cite examples where advocates describe how the offspring is often groomed for the position, starting early on in their careers leading divisions of the company, etc. What strikes me as inherently problematic is the idea that opportunities are created for offspring that are not afforded other, perhaps more capable contenders. In addition, many of these companies, have multiple classes of stock. The stock that you and I buy have restrictions on their voting. Essentially, the family who runs it, owns all the voting stock. So, why do we call these public companies? And are the decisions to hand off the controls to Junior when Dad retires REALLY in the best interests of shareholders?
Great post. The org dynamics in these firms is really wild. Lots of good writing out there by Randy Carlock and Manfred Kets de Vries on Succession and Business Planning. You have got to hope in these situations that that board (which also most often in included and/or suffers with the family dys/function)has required the company to appropriately "train" the offspring to take-on these jobs and that they really are the right people for the roles.