Strengthening the Board's Ability to Execute Its CEO Succession Plan
While CEO succession planning should be a priority for boards, 21% of board members and executives who participated in Nasdaq’s 3rd Annual Global Governance Pulse survey indicated that their boards do not have a CEO succession plan and another 16% only have an emergency plan, which suggests boards may be falling short on a critical board responsibility. Even among those that have a CEO succession plan, the comprehensiveness of practices vary. While 57% report having CEO succession plans in place that include both emergency and long-term provisions, gaps remain in the level of oversight and visibility boards have into critical aspects of succession planning. For example, nearly 1 in 6 respondents report that their board has no visibility into management succession plans, which may limit those boards’ ability to act decisively, especially in the event of an unplanned departure.
This gap may reflect how boards approach CEO succession planning. Plans exist, but a board’s ability to carry out a succession planning process effectively may be constrained by several factors. These may include: the effectiveness of its CEO performance assessment process; its visibility into the potential successor pipeline; its ability to align with management on succession priorities; or how effective the organization is in aligning succession planning with its talent development framework and organizational strategy. When any of those factors fall short, boards may lack the information and processes needed to effectively manage CEO succession planning and prepare for future leadership transitions. CEO succession planning is most effective when boards treat it as an ongoing, integrated governance process.
CEO Assessment and Succession Planning
CEO succession planning relies on the board’s understanding of leadership effectiveness and the capabilities required to execute the company's long-term strategy. While common performance indicators provide visibility into financial and operational results, they offer limited insight into the extent to which CEOs are developing future leaders, strengthening the executive team, or building the organizational structure and capabilities required to sustain performance over time.
Additionally, key perspectives that could strengthen succession planning remain underused. Governance Pulse survey findings indicated that fewer than 50% of respondents’ boards incorporate board member observations into their CEO evaluation process, and just 19% solicit feedback from the CEO’s direct reports. Board members are in a unique position to observe a CEO's strengths and weaknesses across operating cycles, during strategic shifts, and under various business conditions. A CEO's direct reports can provide perspectives on day-to-day leadership effectiveness and executive team strength. Without these inputs, boards may lack a complete view of leadership effectiveness, bench strength, and succession options.
Expanding the CEO evaluation process to provide better insight into leadership effectiveness, bench strength, and talent development can give boards a stronger basis for effective succession planning. A more strategic CEO evaluation defines performance priorities, clarifies future leadership requirements, aligns expectations across the executive team, and provides boards with a stronger foundation for succession planning decisions.
Leadership Pipeline Visibility and Execution Risk
For effective CEO succession planning, boards need to have sufficient visibility into the leadership pipeline. According to Governance Pulse survey findings, most respondents (62%) report engagement with both C-suite and next-level management. This engagement strengthens board visibility into leadership depth and supports more informed succession planning decisions. It also helps boards develop independent perspectives on management talent and readiness, giving them greater confidence when evaluating internal candidates or determining whether an external search may be necessary. Without regular engagement beyond the C-suite, succession planning may become reactive and result in time pressure, limiting options and increasing execution risk during a transition.
Maintaining visibility includes:
- Regular updates on internal candidates and readiness levels
- Monitoring the ongoing effectiveness of the organization’s approach to succession planning
- Direct engagement with next-level leaders through board interactions
- Ongoing review of leadership development across critical roles
These practices help ensure CEO succession planning reflects current organizational realities rather than point-in-time assumptions and provides boards with greater confidence in the organization’s succession planning process. Effective succession planning should not assume that leadership roles will always be filled internally. Visibility into leadership capabilities helps boards assess internal candidates while also identifying situations where an external search may better support the organization's future strategic and leadership needs. Boards may also assign oversight to a committee to coordinate succession planning, clarify responsibilities, and prepare for internal or external searches.
What CEO Succession Planning Looks Like in Practice: Public Versus Private Companies
Strengthening CEO succession planning depends on how consistently boards apply core governance practices across evaluation, oversight, and planning. The expectations and execution of these practices may differ between public and private companies, particularly across governance structure, ownership type, and growth stages.
The checklist below translates succession planning into actions boards can take to assess whether their current approach supports execution when leadership transitions occur.
CEO evaluation
Expand the evaluation to include board observations, leadership effectiveness, talent development, achievement of defined goals, and formalize how these inputs are captured and reviewed. Board observations may include insights gathered through ongoing interactions with the CEO across operating cycles, strategic shifts, and various business conditions. Consider bringing in a third-party facilitator like the Nasdaq Board Advisory team to enhance objectivity and gather more candid feedback.
Leadership pipeline visibility
Require regular reporting to the committee with responsibilities for management succession on internal candidates and external pipeline, with regular updates provided to the full board. Engage with next-level leaders through board interactions to support succession planning. Evaluate whether future leadership needs are best met through internal succession or an external search.
Board-management alignment
Embed succession planning and talent development into recurring board and management discussions.
Succession plan design and triggers
Maintain emergency and long-term provisions with clear oversight and review cadences.
Alignment with strategy
Align CEO succession planning with the company's long-term strategy and talent development framework, ensuring future leadership competencies are identified, developed, reviewed, measured, and reported on over time.
Governance cadence and accountability
Document succession processes to support transparency and meet disclosure expectations.
CEO evaluation
Move from informal assessments to a structured, documented CEO evaluation process to align the leadership priorities and characteristics to the short- and long-term vision for company growth. Consider working with a third-party facilitator like the Nasdaq Board Advisory team to help get started.
Leadership pipeline visibility
Identify critical roles and potential successors early and track their development against the company’s future leadership needs. Understand how leadership must change as the company moves through milestones in its lifecycle.
Board-management alignment
Set clear expectations around succession planning, particularly in founder-led environments.
Succession plan design and triggers
Define trigger events and transition scenarios in advance.
Alignment with strategy
Define the leadership profile and competencies needed for the next stage of company growth and use them to identify potential successors and assess readiness.
Governance cadence and accountability
Establish a repeatable cadence for succession discussions and understand and meet stakeholder needs for transparency on these matters.
CEO Succession as an Ongoing Governance Process
Boards that approach CEO succession planning as an ongoing governance responsibility, integrated into broader governance and talent discussions rather than as a periodic exercise, and have the requisite tools, tend to realize stronger succession outcomes. As companies evolve, leadership requirements change, making continuous board oversight essential. In practice, this comes down to three actions:
- Evaluating leadership effectiveness, talent development, and executive team strength to inform succession planning decisions
- Maintaining continuous visibility into the leadership pipeline
- Aligning with the CEO on talent development and succession priorities
This approach gives boards the time and insight needed to prepare candidates, test potential successors in expanded roles, and reduce disruption during CEO transitions. Together, these practices allow boards to prepare for leadership transitions over time rather than assessing succession only when a transition is imminent, giving companies greater confidence when leadership change occurs.
Nasdaq’s CEO evaluations help boards strengthen oversight of CEO performance in support of CEO succession planning. Designed and implemented by Nasdaq’s Board Advisory team, the process brings structure, objectivity, and actionable insight, enabling a clearer view of leadership strength and helping boards prepare for leadership transitions. By providing boards with deeper insight into leadership effectiveness, bench strength, and talent development, CEO evaluations can help inform succession planning decisions and identify future leadership requirements.
Ready to improve your CEO succession planning? Learn more about Nasdaq’s CEO evaluations here.