Board Member Today; CEO Tomorrow

The number of Fortune 1000 directors who became the CEOs of the companies on whose boards they served more than doubled in the past year.

In the wake of a tumultuous business climate, boards of directors are increasingly looking within their own ranks when seeking CEO replacements. That's the word from leadership advisory firm Heidrick & Struggles, which notes that the number of Fortune 1000 directors who became the CEOs of the companies on whose boards they served more than doubled in the past year.

From July 2009 to mid-October 2010, nine directors became permanent CEOs at firms they served, compared with four directors in the previous year, data show. Additionally, three directors were named interim CEOs in 2010.

"Boards are being confronted with market-driven disruptions and are showing a willingness to make a change if a lower risk solution is readily available," says Heidrick & Struggles Vice Chairman John Wood in explanation. "Choosing a current director as CEO is a highly pragmatic decision by the board -- a practical solution to an atypical set of circumstances."

Wood points out other advantages directors bring to the CEO role during periods of disruption:

  • Frequently they can step right into the role, many having been former chief operating officers.
  • They are obviously familiar with the company, its business and its culture.
  • For the board, by selecting one of their own they know they are likely to have someone aligned with their thinking.

The vice chairman points out that such a decision may bring added pressure to the director-turned-CEO, however. "Since they have been working together as directors for so long, and presumably have been in alignment, there is a heightened expectation about performance."

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