Challenges in Succession Planning
Succession planning can be a difficult process, as evident from the experiences of two companies, Diageo and GSK.
In one instance, a CEO was ousted after a two-year tenure, resulting in a 43% decline in the share price. The board appointed an interim CEO, the CFO, to avoid a leadership vacuum while searching for a permanent replacement, as stated by the board chair:
“securing the best candidate… to take the company forward”.
In contrast, the second company announced the COO's promotion to CEO three months in advance, with the current CEO staying on until September 2026 to ensure a smooth transition. This move was well-received by investors, with shares rising 3.6%, and was noted as an example of
“succession success”.
These two examples highlight the different approaches to succession planning, with one company experiencing a more tumultuous transition and the other achieving a more seamless handover.
Author's summary: Succession planning challenges are evident in Diageo and GSK's experiences.
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