The Chairman Academy

Founded in 2003 by executive recruiter Dennis Carey, the Chairman Academy invites over 200 of the world’s most prominent business chairmen and directors to participate.  Together, these business leaders meet once a year to discuss their governance insights and their experiences.

They examine the changes occurring all the time in governance, shareholders and compliance.  The next program is scheduled for May of 2010 in New York City.  Past participants have included: Norm Augustine, retired Chairman & CEO, Lockheed Martin Corporation; J.T. Battenberg, Chairman, President & CEO, Delphi Corporation; Betsy Bernard, retired President, AT&T; Ed Brennan, Executive Chairman, AMR Corporation and many others.

Past speakers for the Chairman Academy have included: Chuck Ames, Partner, Clayton, Dubilier & Rice; Peter Atkins, Partner, Skadden, Arps; Joe Badaracco, Professor, Harvard Business School; John Blystone, Chairman, President & CEO, SPX Corporation; Larry Bossidy, retired Chairman & CEO, Honeywell International and many others.

Picking the Right Insider for CEO Succession

In an article which appeared in the Harvard Business Review Dennis Carey discussed the method in which the new CEO of GlaxoSmithKline was appointed when the old CEO, Jean-Pierre Garnier retired in 2008.

The process was complex and thorough. Three candidates from inside the company competed for the coveted position. All three were qualified to become the new CEO so it was decided to judge the most qualified by giving each candidate a year-long project on the level appropriate to a CEO while being carefully supervised by the retiring CEO Garnier and the board of directors.

Since each of the three tasks were not alike, it was decided to create a parallel process to better evaluate each candidate on similar terms. The parallel process consisted of a completely confidential and outsider-led assessment of the candidates originating from 14 internal executives who were able to work directly with all three.

Interviews were also conducted with each of the three candidates, by Dennis Carey, who submitted feedback to the board and to Garnier. The 14 inside executives were then asked a battery of questions to better understand the strengths and weaknesses of each of the three CEO candidates. They were asked questions like: “What were the candidates’ best and worst decisions? What are their strongest and weakest leadership qualities? Whose capabilities are the most suited to meet the company’s strategic needs? Whose temperament, passion, and work style best match the company’s culture and strategy?”
The interviews with the 14 execs were able to give the kind of useful information which allowed the board and Garnier to assess the candidates capabilities for leadership strengths and weaknesses in a more comparable and useful way.

Dennis Carey praised this thoughtful process for finding the best replacement CEO, but bemoaned the fact that the media seemed to miss the most important lesson for corporations, as Mr. Carey says in his article,

“A company would do well to establish parallel approaches to succession. Insiders often get the corporate top job—in fact, more than 80% of the current Fortune 100 CEOs were selected from within the companies’ ranks—yet the high turnover among CEOs is testament to the frequency with which companies pick the wrong insider. A set of parallel approaches allows a company to gather comparable data about internal candidates, with each process filling in the informational gaps left by the other.”

Carey:Leave CEO and Chair Roles Combined

In May 2009, Senator Charles Schumer, Democrat of New York has proposed legislation which will split the roles of chairman and CEO in public companies. Dennis Carey sees this proposal as one more of Washington’s bids to keep the sector of free enterprise safe from the scourge of democracy. The last time Washington got involved it was the Sarbanes-Oxley Act, which many CEOs believe forces boards to pay more attention to their adherence to this law than to leading their companies to success.

Believing that this latest bid to control corporate culture flies in the face of common sense and proven results, Dennis Carey explains why this latest reaction to the depressed worldwide economy is a mistake.

According to Mr. Carey, today’s corporations practice good management and governance with the roles of chairman and CEO combined in one position. Dennis Carey points to the fact that over 60% of the largest corporations in the United States today in fact do combine the chair and CEO roles. And there is a good reason for this fact. This system of corporate governance popular in the American system allows flexibility when responding to the unique culture, personality, history and dynamics of each board.

It has not been proven in any way, according to Carey, that splitting the CEO and chairman roles, as it is commonly practiced in European corporate culture and in some cases in the U.S., improves the success of those companies compared to the combined-role companies here in America.

In this case, it makes little sense to mandate splitting of the chair and CEO roles if there has not been shown to be any improved outcome for the company. The opposite. It would prove more prudent to “not fix something if it isn’t broken.”

CEO Succession Planning

CEO succession planning is more important now than ever before.  Between January and August 2009, 834 CEOs left their jobs in America, according to the global outplacement research firm Challenger, Gray & Christmas.  Challenger actually found 101 CEO exits just in August 2009.

When  a CEO position changes hands, it can really shake the company.  Investors may start losing confidence in the company’s management and suppliers and customers may start getting nervous as well.  Employees may sense the nervous energy and start to become frustrated with management and wonder if it’s time to look elsewhere for employment.

Often, when a CEO knows that he is leaving, there is a lot of unknown territory to cover.  And much of the time, no one wants to ask the hard questions.  Dennis Carey, executive recruiter, emphasizes that the board needs to take on the responsibility of recruiting the next CEO.  As Dennis Carey says, “The corporate boards that take on a systematic, predictable and transparent process in choosing the next leaders of the organization build stronger cultures, clarify the company’s strategy and deliver value to all stakeholders, including employees.”

Dennis Carey Discusses SOX and the Brave New World of Auditing

In an article published by the Harvard Business Review, Dennis Carey discussed the new responsibilities of the audit committee since the passage of the Sarbanes-Oxley (SOX) legislation in 2002. Although there is very little glamor associated with this function, especially compared to the fun perks often associated with service on the board of directors, a member of the audit committee performs a vital function usually taking on the responsibility of monitoring an array of various functions.

Dennis Carey points out some of the functions the audit committee overseas, such as watching over the principles and processes with which the company records and distributes its financial information; the monitoring and hiring of outside auditors such as public accounting firms; making sure the company conforms to all the required regulations; managing the financial controls of the company; and discussing and reviewing the relevant risks with the senior management of the company.

Dennis Carey on CEO Succession

When a CEO leaves a company, everyone understands that it is critically important to find another CEO quickly.  What is less clear, however, is how to go about doing so.  The board doesn’t want to ask too many questions while the CEO is still in place, and the CEO doesn’t want to bring up the many issues that need to be discussed.

Dennis Carey, executive recruiter, explains, however, that the board has a large responsibility in helping to find the new CEO.  As he says, “In today’s transparent, highly competitive and global environment, boards have come to see that their role in CEO succession is a fundamental fiduciary responsibility on behalf of all shareholders, ensuring the integrity and continuity of leadership in the organization.”

Everyone in the company needs to be working together to achieve the goal of smoothly finding and integrating the new CEO.

Sarbanes-Oxley Places More Responsibilties on Audit Committees

When given the choice between service on the board of directors or joining the audit committee, most corporate executives, according to Dennis Carey, have no trouble deciding- they almost always opt for the board of directors. After all, says Dennis Carey, co-author of an article which appeared in the Harvard Business Review, any clear thinking person would rather spend his time involved in sailing, golf, or international travel than the brave new world of financial disclosure and reporting which has come into being since the passage of the Sarbanes-Oxley bill in 2002.

Since 2002 the members of the audit team are constrained by new operating frameworks. They are subjected to more meetings composed of sorting out all kinds of compliance details in addition to risking their own reputations.

Extra Hints for CEO Succession Success

Finding a new CEO is not always an easy process, and it isn’t one that is completed overnight.  Dennis Carey offers a number of important hints and reminders that any company should keep in mind as they begin the process of recruiting a new CEO.

First of all, the recruiting of a new CEO should be undertaken in the open, and should be conducted in an objective manner.  There should be input from the global intelligence of the company.  All candidates, whether they are potentially a good fit for the company or not, should be given the feeling that they had a fair shot at the CEO position.  Another important point that Dennis Carey emphasizes is that the recruiting process should be perceived by everyone in the company as a fair process; all major constituencies should believe that their voice is being heard and considered as part of the overall process.

With these guiding principles, the recruitment process should progress more smoothly and the CEO succession process should leave the company and board members, as well as the CEO candidates, with a feeling that the process was carried out in a professional and fair manner.

Learn Guiding Principles for CEO Succession

When any company is in the process of finding a new CEO, there are certainly many important principles to keep in mind.  Dennis Carey explains that companies would be well served to remember that one size does not fit all.  Each company needs to figure out, for itself, what its needs are and to analyze the type of CEO that would best fit those needs.

The company, as Dennis Carey outlines, should create a roadmap for CEO succession.  This roadmap would begin with a thorough delineation of the business strategy and this strategy should serve as the basis for the rest of the process.

Another important principle to remember is that when the company’s strategy shifts over time, the roster of possible successors should be fluid. This means that when the company reevaluates its goals and outlines its strategies, the ranking of likely successors may change as a result.  This is a natural progression and one that shows a healthy approach to finding the right CEO successor.

Practical Tips for Succession Success

There are a number of key ways to ensure a successful recruitment of a new CEO when the previous CEO leaves a company.  As Dennis Carey understands, it is vital, first of all, to have a strong and involved board. This will help to ease the transition and to smoothly introduce the new CEO to the company.  Similarly, top management should continually be exposed to the board.  Next, any CEO prospects should be encouraged to obtain experience with outside boards, the media and the financial community.

In addition, Dennis Carey recommends that the company create an active executive committee with the goal of having more executives receive exposure to the company, its strategy and its issues.  Companies should continually participate in succession planning on an on-going basis.

Another specific recommendation is to tie some of the CEO’s compensation to succession planning and progresses.