Succeeding at CEO Succession Planning: Linking Expertise, Board Attention, and Planning Activities

While formalized succession planning activities by boards can help with CEO succession outcomes and directors recognize their importance, there remains considerable variance in the degree to which boards actually conduct such activities. Drawing upon the attention based view of the firm and information processing theory, we propose that boards which have individual directors who possess relevant professional expertise related to CEO succession are more likely to be consistently engaged with CEO succession planning. As a result, we suggest that boards with directors who have backgrounds suggesting CEO succession planning expertise will be more likely to conduct formalized CEO succession planning activities. Thus the positive relationship between individual CEO succession expert directors and formalized succession planning activities by the board is partially mediated by the board’s attentional engagement with CEO succession planning. We identify two kinds of directors, those with professional experience working in human resources and those directors who are retired (outside) CEOs, who qualify as directors with CEO succession expertise. We test our hypotheses utilizing a sample of 354 firm-year observations from large North American firms across three years (2013-2015).