Navigating CEO Transitions

When it comes to CEO transitions, corporate directors play a pivotal role in ensuring a smooth succession while upholding their fiduciary duty to shareholders. Directors need to strike a balance between the outgoing CEO's separation package and negotiating fair terms for incoming leadership.

Properly incentivizing and rewarding a departing CEO is complex, involving factors like tenure, performance metrics, existing unvested equity, and reputational considerations, often in the context of an existing employment agreement. The board must weigh appropriate severance for a job well or poorly accomplished, and avoid "golden parachute" payouts that could spark investor backlash if separation is part of a change in control.

On the flip side, structuring the new CEO's compensation in a way that attracts top talent and incentivizes long-term value creation is equally crucial. Increasingly, boards are exploring more progressive pay models like higher equity components, ESG/DEI targets, and even unique perks, like wellness benefits, to stay competitive in the executive market.

Would you share your perspectives regarding how boards should navigate CEO transitions more effectively? What compensation frameworks or benchmarks do you find most appropriate and defensible? Let's have an insightful discussion around best practices in this high-stakes aspect of corporate governance.