How Succession Planning Fits into Good Corporate Governance

  • by Vivek Sadhale, Company Secretary & Head — Legal and Investor Relations
  • Vikas Agarwal, Senior Manager — Corporate Secretarial, Persistent Systems Ltd.
  • February 23, 2011
Mitigating the risk of the inability to retain senior level employees is important in preparing organizations for the future. Succession planning is therefore a crucial part of good governance for companies big and small. If you put a strategic plan in place to mitigate the loss of a critical employee, the company can run more smoothly even if employee changes are seen.

In August 2010, Goodyear Tire & Rubber Company announced the election of Richard Kramer, president and chief executive officer, as the chairman of the board effective October 1, 2010. Kramer succeeded Robert Keegan, who retired. A few weeks later Hewlett-Packard faced an uncomfortable position when it announced the abrupt ouster of CEO Mark Hurd, with no permanent replacement ready. Analysts have been critical of HP on this count, and the company’s stock price dropped around the time of the announcement.

Had HP had a strong succession planning policy, it could have had a smoother transition. Indeed, to have a strong governance initiative, you need to consider succession planning. If not, you could be left unprepared to handle a transition at a key position during a significant product launch or company expansion, or make your own employees who are looking for career opportunities feel disgruntled. We’ll discuss the key areas of the succession planning process, including the roles of top management and HR.

Vivek Sadhale

Vivek Sadhale is a company secretary and head — legal and investor relations of Persistent Systems Ltd., one of the leading outsourced software product development companies with a turnover of about US$127 million and more than 5,500 employees. He has 14 years of hands-on experience in corporate secretarial, corporate governance, investor relations, mergers and acquisitions, capital market transactions, and international legal matters, with exposure to management accounting, finance, and treasury functions within reputed Indian and multinational organizations. A commerce and law graduate, Vivek completed his chartered secretaryship exam in the UK and is a qualified company secretary and management accountant in India.

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Vikas Agarwal

Vikas Agarwal is a senior manager — corporate secretarial with Persistent Systems Ltd. He has more than nine years’ experience in corporate secretarial, corporate governance, legal, and intellectual property rights-related issues. He is a member of the faculty for various training programs conducted by the Institute of Company Secretaries of India (ICSI), a visiting faculty at Indian Law Society’s Law College, and an editor and writer of articles in a number of publications. Vikas is a qualified company secretary and commerce post-graduate.

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