Prudent and proactive board succession planning: A case study of selected companies in South Africa

Abstract

Orientation: The monitoring and advisory roles of directors are highlighted by escalating corporate uncertainty and diminishing confidence in leaders in the latest phase of the industrial revolution. Nomination committees should thus give due consideration to current and required human capital needs of boards when conducting succession planning, as their decisions have substantial implications for stakeholders.

Research purpose: To investigate board succession planning practices and policies at selected companies listed on the Johannesburg Stock Exchange.

Motivation for the study: There is an evident need for proactive succession planning that accounts for prudent board renewal and director development to ensure business continuity.

Research design, approach and method: Given the well-developed corporate governance framework in South Africa, the views of eight selected directors were gauged on succession planning by conducting semi-structured interviews. Thematic analysis was conducted to derive themes from the qualitative data.

Main findings: Nomination committees increasingly account for board composition concerns raised by prominent shareholders. The interviewees suggested that board succession planning is often not formalised. They mentioned that succession policies should be flexible to account for rapid change. Furthermore, the board development mechanisms applicable to executive and non-executive directors differ substantially. Proactive development of the talent pipeline is thus essential.

Practical/managerial implications: As heterogeneous boards offer several benefits to companies and their stakeholders, nomination committees should account for diversity considerations when conducting succession planning. Policies pertaining to tenure, diversity and independence should be formalised and annually evaluated and reported on.

Contribution/value-add: Several recommendations are offered to enhance board succession planning, based on the lived experiences of directors in an emerging market.