Who gets the key when the CEO refuses to drive?

HDFC Bank seems to have encountered an unusual problem: a CEO announces his exit faster than a board can find his replacement. With the Subhash Chandra verdict still reverberating and the bank taking a bruising, Sashidhar Jagdishan’s decision not to seek another term seems to have sent the board scurrying into an unscheduled meeting to persuade him to stay. Which raises an impolite governance question, “Was the succession plan actually a plan — or merely a document waiting for a crisis to give it a purpose?”

Top-level executive succession planning has long been inconsistent among the worlds’ corporations and even in large MNCs; it is often vague and reactive on who could be next. Or, perhaps the talent planning and development for top roles are well in place in many organisations, but what is missing might be the chief executive succession plan. In your own organization, how current and actionable are your emergency succession plans? The COVID-19 crisis had shaken up a lot of certainties about how effective executive succession planning really is. Is the HDFC board plans in jeopardy because of the loan assets and a class action suit in the USA?

Here are a few questions a board can consider to check if their CEO succession plans are solid:


Is your “plan” really a plan? We find that many of our global corporate clients realising the harsh reality of dud succession plans at unusual crises such as the Iran war or Covid. A survey of over 250 S&P500 companies found that many of them believed this to be emergency plan with just a few having a formal, written plan. This is defined as who does what, and precisely how the plan will be implemented. (Note: writing a name and tucking it into an “Open in Emergency” envelope is not a plan).

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Is the plan both deep and flexible? Best practice today is to demand that the current CEO, top management team, and the board craft a crisis plan that can be implemented at once, smoothly, and with flexibility. Organisations should have at least two or three names in the list and not just one. This goes beyond assuring leadership in case both #1 and #2 are hit by the same bus. If the current CEO has an unfortunate accident and the current strategy is working, you may have a best-case successor. But what if the CEO leaves in a scandal, the HDFC-kind of crisis, or an activist investor demanded the change? You will want another name in the envelope who can both lead and shake things up. Consider also a 3-month emergency successor who might step up from the board until a longer-term inside successor can take the reins. Use scenario planning and risk heat maps to craft a matrix of responses.

Will we need a “temp” CEO? In the UK, Prime Minister Boris Johnson was temporarily waylaid by COVID-19, which shook up the British political system that had no provision for a short-term fill-in PM. So what if your company faces this situation? The chief executive must be out of circulation during recovery from illness or injury. How much regular duty can he or she handle during convalescence (if any), and for how long? When faced with a serious crisis that was perhaps not caused by the current CEO, such a temporary “understudy” CEO plan is a must.

Should our succession plans be different now and how? Even assuming you had all the above plan elements in place at the start of 2020, the world suddenly changed... and so had your view of your leaders and their skills. While the pandemic might not have changed the world but only accelerated the changes that were visible a year or two before, it certainly felt different for the uninitiated. CEOs now realise that they need more resilience, agility and ability to lead by example. Like peacetime generals in wartime, potential successors may have shown themselves not up to the radical demands of the past few months of “Trumpism”. Many rising executives who came of age since the Covid have never faced a trauma such as the every-Friday contra-stance by Trump that swings the markets. Is your board building a review of crisis responses and results into its talent evaluation? Some of our client boards are making a second leadership assessment of their leaders currently. They are also searching for outside talent now. We know of a dozen boards asking for external candidates who’ve been through prior crises and recovered.

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The economic world will continue to see more crises to shake up long-term succession planning. We predict many CEO hires from industries other than theirs will happen. Some boards may tend to play it safe by sticking with hires from closely allied fields. Also, as is common in a crisis, boards are sticking with their current talent line up for now, meaning less immediate top exec turnover. While the CEO stints are getting shorter, it gets a bit longer during macro crises.

CEOs who aren’t up to the demands of 2026 will be vulnerable in 2027. Investors and regulators have prodded boards to disclose more on their succession plans over the past few years. The ultimate test of a board’s succession plan is this: ask the CEO to resign tomorrow and see what happens. If the board reaches for a succession document, it has governance. If it begs the CEO to reconsider, it has a dependency problem. As NACD research shows, almost a third of public-company boards still report that they do not have an identified successor capable of stepping in effectively tomorrow. As a veteran board chair says, “There is no point in admiring the fire extinguisher, find someone who can actually use it when the building is burning.”