The Succession Gap

CEO succession is arguably the most important responsibility of any corporate board, yet research from Spencer Stuart reveals that only 35% of FTSE 350 companies have what could be described as a robust succession plan. The remaining 65% rely on ad hoc processes that, when triggered by an unexpected departure, result in costly interim arrangements and protracted external searches.

The consequences of poor succession planning are measurable. Research from the London Stock Exchange Group shows that unplanned CEO transitions in FTSE 350 companies are associated with an average 8% decline in share price in the month following announcement, compared to just 1.5% for planned transitions. The difference represents billions of pounds in destroyed shareholder value.

Why Boards Fail at Succession

Several factors explain the persistence of poor succession planning in UK companies. The most significant is the incumbent CEO's reluctance to engage with the process. For many chief executives, succession planning feels like planning their own funeral — an uncomfortable exercise that implicitly acknowledges their replaceability.

Board dynamics also play a role. Non-executive directors often lack the deep organisational knowledge needed to identify and evaluate internal candidates effectively. They may see the CEO only six to ten times per year, making it difficult to assess the leadership potential of executives two or three levels below the top.

Furthermore, UK governance norms create a structural tension. The UK Corporate Governance Code recommends that the board chair leads succession planning, but many chairs lack the time, resources, or organisational access to do this effectively alongside their other responsibilities.

What Best Practice Looks Like

Companies that excel at succession planning share several characteristics. First, they treat succession as an ongoing process rather than an event. The board maintains a continuously updated assessment of internal candidates, typically looking two to three leadership levels deep in the organisation.

Second, they create genuine development opportunities for potential successors. This means giving high-potential executives exposure to different parts of the business, board-level interactions, and stretch assignments that test their leadership capabilities under pressure.

Third, they maintain external market awareness. Even companies committed to promoting from within benefit from understanding the external talent landscape, both to benchmark their internal candidates and to maintain relationships with exceptional external leaders who might be relevant in specific scenarios.

Companies such as Unilever, AstraZeneca, and RELX have been recognised for their succession planning practices, treating it as a year-round board priority rather than an annual agenda item.

The Emergency Succession Blind Spot

Even companies with strong long-term succession plans often neglect emergency succession — what happens if the CEO is suddenly incapacitated or departs without notice. Best practice requires boards to maintain a standing emergency succession plan that identifies who would step into the CEO role immediately, what authority they would have, and how the board would communicate the transition.

The Financial Reporting Council has increasingly focused on succession disclosure in its reviews of UK corporate governance. Companies are expected to demonstrate that they have credible succession plans in place, though the level of detail disclosed publicly remains inconsistent.

Building a Succession Culture

The most effective approach to CEO succession is to embed it within a broader talent management culture that identifies and develops leadership potential throughout the organisation. Companies that do this well find that CEO succession becomes a natural culmination of a well-functioning leadership pipeline rather than a discrete and anxiety-inducing board exercise.

For UK companies, the message is clear: succession planning is not optional governance housekeeping. It is a critical risk management discipline that protects shareholder value, ensures organisational continuity, and demonstrates the board's commitment to long-term stewardship.