In an October 2009 release,[2] the United States Securities and Exchange Commission effectively removed the ordinary business exclusion defense used by companies reluctant to disclose their CEO succession process to shareholders.
The policy change allows for a new wave of corporate governance scrutiny, as regulators and shareholders increasingly focus on CEO succession practices.
Staff Bulletin (SLB 14E) announced that, in principle, the commission no longer allows companies to exclude shareholder proposals based on an argument that CEO succession planning is an ordinary business operations matter.
The change indicates that regulators have reframed CEO succession as a risk management issue and placed its responsibility firmly in the boardroom.
Succession planning responsibilities are redefined as “a key board function” and “a significant policy (and governance) issue … so that a company is not adversely affected by a vacancy in leadership.”[3] CEOs can be put in place from multiple options available to any organization, some of which are: