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Facing the dilemmas of succession

Johann Redelinghuys is previously founder and chairman of Heidrick & Struggles South Africa, now The Director of the Chairman's Institute and of Portfolio&Co

Why is it that people in power will sometimes stubbornly refuse to understand that it is time to leave? Even when they are confronted with overwhelming indications that their tenure is over? Is the business of leadership so intoxicating that an incumbent leader must hold on at all costs?

We know politicians often do it. Look at how Vladimir Putin in Russia is manoeuvring to keep himself in place, and Syria is being torn apart by an obstinate president who refuses to go. Not to speak of Robert Mugabe and a raft of others. Yes the money is an issue, and building one’s wealth must be a driver. Think of the personal fortunes said to have been amassed by Muammar Gaddafi and the others in Tunisia, Yemen and Egypt. But one has to ask, why would it be that even the prospect of a very comfortable retirement, with the children all settled and provided for, as well as the gratitude of a population are not sufficient inducements to take leave at an appropriate time?  

But it’s not just the politicians who are guilty. The governance landscape is littered with chairmen, board members and CEOs who have stayed beyond their time. There is of course a fine balance. A business benefits substantially when those in charge know and understand the business. That takes time. So they should not leave too soon or go before they have had the full opportunity to make the best contribution. Board members, especially the new breed of younger and less experienced ones, are often criticised for having no more than a superficial knowledge of the industry. Their real contribution is sometimes in doubt. But, while retaining the skills and knowledge of experienced board members, there has to be an understanding that a time comes when it is in the interest of the company to have a new chairman or CEO. Or when the board has to find some new non-executive director talent.

Although the truth of poor leadership performance of a CEO or chairman can stare all concerned in the face, CEOs and chairmen themselves, as well as boards of directors, still find it difficult to take action and get on with a termination, even when it may be overdue. This is partly due to the sensitive nature of working in a collegial boardroom climate where members tend to be friendly and collaborative. They often leave it to the remuneration committee and hope that it can be dealt with quietly. Talking in the full board about succession is a touchy business and is not always handled well. Most chairmen realise that after two terms of, say four years, it is sensible to hand over the reins. But some don’t. Non-executive directors should not have to be prodded by the results of a board review or the annual chat with the chairman before offering their timely resignation.

CEOs don’t want to leave when they are doing well and the share price is giving them the rewards they bargained on. Then when the business is not doing well, they want to stay to improve their performance so as not to leave on a bad note. In some cases none of these are issues because they stay, simply because they can. One reason may be that there is relatively little coaching about what to do when one leaves, and so carrying on would seem to be the best option, especially if the money is good. Few people have the energy or the initiative to re-invent themselves and to develop a meaningful second or third career. And if it pays well, why leave? In the end, leadership can create greed.

Consider the issue of taking on too many non-executive appointments. Senior executives are sometimes encouraged by their boards to take on one or possibly two outside board appointments. This can give a broader perspective and a deeper understanding of what is going on outside their company. It sharpens judgement and helps to avoid not seeing the wood for the trees. But some CEOs commit themselves to a load way beyond their time capacity, and even outside of their interest. Why? The money paid to non-executives is generally not great. The risks are enormous and steadily increasing. Is it the prestige and the power of extending one’s influence? Is it the benefit of building a network, or perhaps a hedge against a time when one is out of the executive ranks?

Whatever it is that keeps leaders locked in, it is worth remembering that while it is the board or the chairman or whomever it is who manages and prompts the succession process, it is the individual, you yourself, who should take the cue. Whether you are a politician, a company chairman, CEO or board member. DM


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