The governance succession gap that boards overlook

Succession planning has become a much more immediate concern for boards, writes Glenn Oborne, Director at Ingen Partners. 

Recent research from The Corporate Governance Institute found that board succession planning had risen from the seventh biggest business risk identified five years earlier to the third, based on a survey of 500 board directors and C-suite leaders across the UK and Ireland.

That reflects a wider recognition that succession is not simply about identifying a replacement when somebody decides to leave. It is about maintaining continuity, capability and effective decision-making when leadership changes.

But there is one part of that discussion which can easily be missed.

Boards spend considerable time thinking about who will succeed the chief executive, how the board itself should be refreshed and whether the senior leadership team has the right skills for the future.

Far less attention may be paid to succession within the governance function supporting the board.

For many organisations, a company secretary, governance director or other senior governance professional holds a considerable amount of knowledge about how the board actually works. They understand its history, its relationships, the reasoning behind established practices and the issues that have previously required particularly careful handling.

If that person leaves unexpectedly, an organisation can discover that its succession plans covered the people around the board table without fully considering the function that helps that table operate effectively.

A senior company secretary’s role is difficult to understand simply by looking at a job description.

There are, of course, defined responsibilities. Depending on the organisation, these may include supporting the chair, planning board and committee meetings, advising on governance matters, maintaining statutory records, overseeing regulatory requirements and supporting director induction and development.

But the value of an experienced governance professional often extends beyond those formal duties.

Over time, they build context.

They may understand why a particular committee was structured in a certain way, how a sensitive issue was previously handled, where individual directors tend to require additional information and which commitments have already been made to regulators, shareholders or other stakeholders.

They also build relationships. A good company secretary will often become a trusted source of advice for the chair, directors and senior management.

Policies and minutes can record decisions and processes. They cannot capture every conversation, relationship or piece of judgement that sits behind them.

That distinction matters when thinking about succession.

The question is not simply whether somebody else could carry out the tasks listed in the role. It is how much knowledge and organisational memory would disappear with the individual currently performing it.

This problem can develop without anybody doing anything obviously wrong.

Governance teams are often relatively small, while their work reaches across a large part of the organisation. An experienced company secretary can naturally become the person who knows the history behind decisions, understands the board’s working preferences and holds many of the key relationships.

The better that person becomes at the job, the easier it can be for the organisation to become dependent on them.

That dependency may only become obvious when they are unavailable.

If a long-serving company secretary handed in their notice tomorrow, who else could explain the reasoning behind the annual board calendar rather than simply produce it?

Who knows the background to recurring areas of concern?

Do other members of the governance team have established relationships with the chair and committee chairs?

Could somebody step into an important board meeting at relatively short notice and provide the necessary context?

There does not need to be a perfect substitute waiting in the wings. In many organisations that would be unrealistic.

There should, however, be an understanding of where the greatest dependencies sit.

A planned departure gives an organisation options.

There may be several months to identify a replacement, transfer responsibilities, introduce a successor to directors and advisers and explain the history behind current governance arrangements.

An unexpected vacancy compresses all of that into a much shorter period.

The board calendar does not stop. Meetings still need to happen, papers still need to be prepared, statutory and regulatory responsibilities remain, and directors continue to need governance support.

Finding somebody who can keep those processes moving is only part of the challenge.

The harder part may be rebuilding the context that disappeared with the previous individual.

A new company secretary can be technically excellent and still need time to understand how a particular board operates. They need to learn its personalities, its history and its expectations while establishing enough credibility to advise senior people confidently.

Where there has been little preparation for the transition, the organisation is effectively trying to replace the person and reconstruct their institutional knowledge at the same time.

That is where a vacancy can become a governance resilience issue rather than simply a recruitment problem.

The UK Corporate Governance Code places clear emphasis on board composition, succession and evaluation. It expects boards to think carefully about their future composition, the skills and experience they require and how succession will be managed over time.

Those requirements relate to the board itself. They do not create an equivalent requirement for succession planning within the company secretarial or governance function.

However, the principle behind them is worth considering more widely.

If a role is important to the board’s ability to operate effectively, boards should understand what would happen if the person performing it were suddenly no longer available.

That does not necessarily mean identifying a named successor.

For one organisation, the answer may be developing somebody internally. For another, it may mean sharing responsibilities more widely across the governance team. In a smaller organisation, there may be no realistic internal successor at all.

The important point is to know that before a vacancy arises.

Some of the most useful succession work is relatively straightforward.

Critical governance processes should not be understood by only one person.

Members of the wider team can be given greater exposure to board and committee work so that relationships and knowledge are not concentrated exclusively at the top of the function.

The reasons behind important governance arrangements can also be recorded, particularly where a practice has developed because of previous board decisions, regulatory discussions or organisational history.

Development matters as well.

Giving less experienced governance professionals responsibility for committees, projects or areas of board activity can create a stronger internal pipeline. Even where they are not ready to take over the most senior role immediately, the organisation becomes less dependent on a single individual.

There is also value in understanding what an external replacement would require.

A company may need somebody with listed-company experience, knowledge of a particular regulatory environment, experience working with an international group or the confidence to advise a particularly complex board.

Those combinations of experience can narrow the available pool considerably.

Discovering that after somebody has left puts the organisation under unnecessary pressure.

Boards and governance leaders do not need an elaborate succession programme to identify whether there is a problem. A handful of practical questions can expose the main risks.

If a large amount of it sits with one individual, what would genuinely be difficult to recover if they left?

This does not mean permanently replacing the senior governance lead. It means knowing who can keep the essential work moving during the first few weeks of an unexpected absence or departure.

If only one person has a meaningful working relationship with the chair, committee chairs or other important stakeholders, the organisation has created another point of dependency.

Broader responsibility and exposure can strengthen the governance team even if the eventual successor is recruited externally.

The more specialist the experience required, the more dangerous it becomes to start considering the market only once a vacancy exists.

The answers do not need to produce a formal succession plan. They should produce a realistic picture of where the organisation is exposed.

People will leave. No succession plan can remove the disruption entirely, nor should organisations attempt to make experienced individuals somehow interchangeable.

The objective is simpler.

Important knowledge should not disappear unnecessarily when somebody moves on, and the board should not discover critical dependencies for the first time during a vacancy.

That means thinking beyond who occupies the most visible leadership positions.

A board can have a clear plan for its next chief executive, a strong pipeline of future directors and a well-developed approach to board refreshment, while still being heavily dependent on one governance professional whose knowledge and relationships have never been properly shared.

That is a succession gap too.

And unlike an unexpected resignation, it is a risk that can be addressed before the organisation is forced to deal with it.