Definition
Succession Planning
Succession planning is the process of preparing for orderly transitions in leadership and key roles within a company.
Good governance requires that the board, through the nomination and remuneration committee, plan for the orderly replacement of the CEO, key executives and directors, whether due to retirement, departure or emergency. The absence of a succession plan is a recognised governance risk, especially in promoter-led firms dependent on one individual.
SEBI LODR makes succession planning for the board and senior management a stated responsibility of the board of directors. Investors and proxy advisers increasingly scrutinise it as a sign of organisational maturity.
Related terms
- Board of DirectorsThe board of directors is the group elected by shareholders to oversee a company's management and set its strategic direction.
- Nomination and Remuneration CommitteeThe NRC is a board committee that decides on board appointments and the pay of directors and senior management.
- Promoter vs Professional ManagementThis contrasts companies controlled by founding promoters with those run by professional managers and dispersed ownership.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.