Deputy CEOs posts 'in decline'
There are just three FTSE 100 companies with a deputy CEO, a report reveals.
The number of deputy CEOs employed at FTSE companies has fallen to just three, according to a report by recruiter DHR International. It added that this number is soon to drop again with Mike Rees deputy CEO at Standard Chartered announcing his retirement earlier this month.
DHR International said the decision by companies to do away with the deputy CEO position has led to some questions about succession planning.
It said deputy CEOs can offer organisations more flexibility over how they handle the replacement of a CEO. By having a deputy CEO in place, the board and shareholders gain reassurance that the sudden departure of a CEO will not impact on how the company is operating during what might be a lengthy appointment period.
DHR International’s Frank Smeekes, said: "Shareholders do not want businesses to go through any period of uncertain management or strategic drift. This can act as a drag on a company's share price as well as impact on profits."
"Having a deputy CEO, who is already known to shareholders and has board experience prevents this and can provide continuity if the board decide to search for an external candidate and then wait for them to finish their notice period."
Mr Smeekes said a well-executed succession plan should involve a maximum of three years between a deputy CEO’s appointment and their succession to the role of CEO. This lowers the danger of losing the chosen successor to rivals by clearly ear-marking them as a future CEO candidate.
He said: "Deputy CEOs can be a powerful tool when it comes to succession planning – provided they are used properly. Where this position does exist, it is important that it is considered as part of deeper board-level engagement with the succession planning process.
"It is vital that the board takes a hands-on role in ensuring that filling the most important position in the organisation is treated as the business-critical process it is."
DHR International said ensuring a forward plan for succession was important for shareholders in cases of short term contingencies and longer term.
"The lack of deputy CEOs in the FTSE 100 at present may well be due to fears over the potential negative effects of appointing an earmarked successor, such as a competitor poaching them, said Mr Smeekers.
"A clear succession strategy reduces these risks substantially and means that regardless of whether the appointment of a new CEO is expected or unexpected, shareholder value can be protected."