Center On Executive Compensation

Boards Focus on Succession With C-Suite Turnover on the Rise

Almost two-thirds (64%) of board directors expect a C-Suite executive to depart suddenly over the next two years, according to a new survey by Corporate Board Member and Farient Advisors. The survey asked more than 200 directors of US public companies how they have addressed succession planning and retention risks.

Key findings:

  • The problem: Directors said that concerns over involuntary turnover at executive levels are much greater now than pre-COVID, and 75% of boards are focusing more on executives two levels down from CEO.

  • 35% of directors said they either did not have enough information to anticipate executive turnover or weren’t sure; the top metrics they wanted to know more about were:

    1. Missed succession plan candidate opportunities
    2. Competitive pay positioning
    3. Value of unvested cash and equity (stickiness)

  • The solution: 70% of directors said they would be willing to take a one-year low Say on Pay vote if a special award would help retain a key executive (but only 10% actually have done so).

  • Culture vscompensation: More than 80% of directors thought a strong company culture helped retain top C-Suite talent, while only 47% thought above median pay did the job. Farient notes that for this reason, some boards have introduced culture targets to the incentive plan that measure items like employee voice, unwanted turnover, ethics adherence, exit interviews, etc.

  • CHRO presenting on talent. As the Center found in its guide to the expanding Compensation Committee, CHROs are increasingly asked to present to the board on succession and talent strategy. Ideas for presentation include exposing the board to succession candidates for all senior executive roles and the use of predictive analytics to assess company vulnerability with regard to C-Suite turnover.

Published on:

Authors: Ani Huang



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