Succession Planning Amid Crisis

In a recent corporate governance blog post lawyers from Shearman & Sterling discuss best practices and considerations for companies and their boards as they confront current crises with a focus on succession planning. The lawyers note that succession planning can be a risk management practice as the unexpected loss of a key person can adversely affect a company’s operations. For fund boards, unexpectedly losing one or more board members can be disruptive, costly, and possibly trigger a shareholder vote. The Shearman lawyers write: “Effective risk management requires identifying the individuals within the organization who have the skills and experience to immediately and effectively fill any gaps.” The lawyers also present several takeaways that may be helpful for fund boards:

• The governance committee or entire board might wish to consider what events may trigger a major absence or skills gap on the board and have a pipeline of potential candidates for critical board roles, including interim and potential permanent candidates.
• When there is a loss or absence of a director, the board should quickly assess the gaps in skills and experience and identify current board members who might be able to step into those roles in the short term.
•  Boards may also evaluate whether some roles can be shared to address a future shortage of skills or multiple absences.