Given the pervasiveness of COVID-19, one issue that boards have had to face is what to do if the CEO or other executive critical to business continuity is suddenly taken ill or required to self-isolate because of exposure to the virus.  What about succession planning? How should the absence be communicated?  A couple of recent pieces from prominent consultants provide some guidance on these issues.

While many boards already have succession plans in place, those plans may not contemplate the potential for the rapid spread of COVID-19. Even in the fortunate event that none of the company’s key personnel becomes seriously ill, the board will need to consider the possibility that executives might be absent on leave for an extended period as a result of testing positive for or experiencing symptoms of COVID-19.  Because of the highly contagious nature of the virus, boards will also need to prepare for the possibility that the prospective successor or multiple executives could also become ill or need to self-isolate.  As a result, boards should be looking at succession plans that are multi-layered.

In this article from comp consultant Semler Brossy, the authors maintain that “emergency succession planning”—which they distinguish from “longer-term succession planning” —should be high on boards’ agendas because of the unfortunate increased likelihood that it will be needed. An emergency where one or more key executives is suddenly not available “requires Boards and other executives to be prepared to marshal resources, act quickly, and communicate with authority to employees, customers, and shareholders in the face of uncertainty. Immediate actions are critical. Effective emergency succession planning frameworks should address a variety of circumstances and allow Boards to use their judgment in what will likely be an environment that is difficult to predict.” To address these potential leadership challenges, the authors advocate that the board keep in mind key principles and test the company’s strategy with scenario-planning exercises.

The authors advocate that three basic principles guide the board’s decision-making and communications.  First, underlying all decisions is that any actions should be guided by the long-term best interests of the company.  In that light, the board will need to assess which work and which roles are critical for business continuity. Second, the board will need to think through in advance the ramifications of change, keeping in mind that the assumption by executives of different roles can create “a chain reaction through the organization as responsibilities are redistributed. Thinking through these ramifications in advance helps ensure that critical gaps are managed and that corporate infrastructure can shift to accommodate new requirements. This may require thinking differently about roles and responsibilities among the team based on available skills.”  Third, the board should prepare a plan to communicate to customers, employees and shareholders “from a position of strength,” allocating responsibilities for communications to help minimize confusion and disruption. The board will need to consider what information  employees, customers and shareholders “need to hear right now,” who is best to convey that information and legal disclosure obligations.

The authors suggest the following key strategies and action items:

  1. Identify an interim candidate—and a back-up for the back-up—for key roles: As noted above, companies may need to identify multiple succession candidates for various critical positions, looking to the executives themselves for information about necessary skills and support, as well as suggestions about emergency replacements. The authors advise that interim candidates are most likely already members of management, but could also be board members. Board leadership replacements should also be identified. The authors recommend that the designated candidates “spend time with the current incumbent to ensure the transition is as seamless as possible.”
  1. Engage with the executive team: Even though succession candidates may have been identified in the ordinary course, the authors suggest that emergency planning may require “more immediate knowledge of the executive team’s strengths, developmental areas, and relationships.” Support from other executives and departments, as well as the board, may be need to be arranged. Boards will also need to consider how to “keep on course” if the board needs to look for an external candidate, as well as time expectations for the replacement to reach the desired level of effectiveness in the new role.
  1. Do scenario-planning exercises and create checklists: The authors advocate that the board conduct various scenario-planning exercises, using multiple scenarios—CEO departure, multiple executives over a short period, multiple key members of single function (e.g., finance), concurrent loss of executive and emergency succession candidate—in the context of current circumstances, with employees working from home, capex and other spending cutbacks and “changing public perception.” The authors suggest allowing time “for directors and relevant executives to have an open conversation.”
  1. Prepare a communication plan: Communication will need to focus on the company’s employees, as well as stockholders, customers and suppliers. The authors advocate that Investor Relations develop “communications plans to help the company control the messaging and deal with inbound media inquiries.” Communications plans could range from one-to-one communications in some circumstances to internal video conferences and town halls to required disclosure, company website postings and press releases.

In this article, after noting recent disclosures of positive tests for COVID-19 among at least a dozen CEOs and CFOs and the possibility that perhaps many others have not made similar disclosures, two representatives from PR consultant Edelman outline the key communications issues for the CEO and board to consider when faced with the potential for a temporary or permanent departure of a CEO or other key executive as a result of COVID-19.

The authors observe that, once an executive does test positive, companies will need to be prepared  “to act quickly and decisively with the right messaging and sequence of events.” However, the more conventional approach to communications may not be effective in this circumstance.  For example, if there are rumors, there may be confusion in many quarters both internal and external. But, in contrast to conventional approaches to disclosure, the authors advocate that “the first audience to prioritize for a COVID-19 case should be employees, to reassure them about the health and safety of their leader and the steps the company is taking to assure the health and safety of the team, as well as the continuity of business as usual.”

How to convey the information?  Recognizing that illness (or testing positive) is, first of all, personal, the authors advocate that a “personal note from the CEO is the best way to set a tone for calmness and continuity and assure all that proper measures have been taken.”  Moreover, if the executive has tested positive but remains asymptomatic and working—even if in isolation—the authors advise use of video to demonstrate the executive’s continued well-being and stability. Although a positive test for COVID-19 may or may not be material, depending on the circumstances, the authors contend that, nevertheless, it is a public health issue that should be disclosed “due to public health concerns.” Disclosure would also help to remove any stigma and promote community in the fight against the virus.  Plus, they urge, being transparent will showcase the executive as a leader setting a good “example for the community of being strong, brave, and disciplined about the steps everyone should take to protect themselves and others….Taking the right tone of empathy and calm will allow stakeholders to trust that they are part of the solution when told the truth about the facts.”


Posted by Cydney Posner