Seven Myths Of CEO Succession: Are Firms Taking The Right Steps To Find The Next CEO?

The CEO’s departure is, sooner or later, inevitable – but are companies prepared for it?

With CEOs turning over at a rate of 10-15% per year – from jumping to another company to resigning due to poor health, poor performance, or just retiring – both accounting firms and public companies would be expected to be well-prepared for CEO succession. But governance experts from Stanford and The Miles Group have found a number of broad misunderstandings about CEO transitions and how ready the board [firm] is for this major change.

In a piece for the Stanford Closer Look Series, David Larcker and Brian Tayan of the Corporate Governance Research Initiative at the Stanford Graduate School of Business and Stephen Miles of The Miles Group name seven myths surrounding CEO succession – myths shared by corporate boards as well as a large amount of the business community.

“The selection of the CEO is the single most important decision a board of directors can make,” say the authors, but turmoil around these decisions at the top “have called into question the reliability of the process that companies use to identify and develop future leaders.”

What are the seven myths? 

Myth #1: Firms know who the next CEO will be. “The longer the succession period from one CEO to the next, the worse the company will perform relative to its peers,” says Larcker. “But, shockingly, nearly 40% of companies claim they have no viable internal candidates available to fill the shoes of the CEO if he or she left tomorrow.”

Myth #2: There is one best model for succession. “There are several different paths firms can take to naming a successor – including internal and external approaches,” says Miles. “One reason firms fall short at succession planning is that they often select the wrong model for their situation. A firm may need an external recruit to lead a turnaround, for instance, or may have the capability to groom multiple internal executives over a period of time to allow the most promising one to shine through. One size does not fit all.”

Myth #3: The CEO should pick a successor. “Sitting CEOs have a vested interest in the current strategy of the firm and its continuance, and they may have ‘favorites’ they want to see follow them,” says Larcker. “Boards, however, must determine the future needs of the firm, and what kind of successor will best match the direction the firm is headed.”

Myth #4: Succession is primarily a “risk management” issue. “While a failure to plan adequately certainly exposes an organization to downside risk, boards should understand that succession planning is primarily about ‘building’ overall value,” says Miles. “Succession planning is as much success-oriented as it is risk-oriented.”

Myth #5: Boards know how to evaluate CEO talent. “Our 2013 survey found that CEO performance evaluations place considerable weight on financial performance and not enough weight on the nonfinancial metrics that have proven correlation with the long-term success of firms,” says Larcker.

Myth #6: Boards prefer internal candidates. “While, ultimately, three quarters of newly appointed CEOs are internal executives, external candidates still hold a strong appeal for succession – especially at the beginning of a search,” says Miles. “Often boards aren’t given enough exposure to internal candidates, and directors are often nervous about giving an ‘untested’ executive the full reins of a firm. There is a still-prevalent bias against promoting the insider ‘junior executive’ to the top spot one day. So, while the myth may end up mostly true in the end, there is often a long journey of getting the board to that decision.”

Myth #7: Boards want a female or minority CEO. “The numbers speak for themselves,” says Larcker. “Diversity ranks high on the list of attributes that board members look for in CEO candidates, and yet female and ethnic minorities continue to have low representation among actual CEOs. We continue to see that boards select CEOs with leadership styles they perceive to be similar to their own, and the fact is that boards today are still highly non-diverse when it comes to gender and ethnic backgrounds.”

Armanino Welcomes New Partner to Lead CFO Advisory Services Practice

Nate Collins

Nate Collins

San Ramon, Calif.-based Armanino (FY15 net revenue of $164.2 million) has announced that Nate Collins has joined the firm as a consulting partner to lead the firm’s CFO advisory services practice, a team of experts in valuations, equity management and accounting, and financial management consulting.

Armanino’s CFO advisory services team has supported a variety of Silicon Valley’s hottest tech firms with services including financial management, transaction advisory, including mergers and acquisitions (M&A) and IPO preparation, equity management and valuation consulting services.

Collins joins Armanino after 12 years at BDO, most recently serving as the lead partner for BDO’s transaction advisory services practice for the Western United States. There he directed buy-side/sell-side due diligence and related negotiations for a wide variety of transactions. He has significant experience in both the domestic and multi-jurisdiction arenas, as well as supporting the M&A-related special project needs for strategic buyers, financial investors and acquisition targets.

Prior to joining BDO, Collins held positions at Deloitte, Aon Corporation and Leo Burnett Worldwide.

Marcum Names Diaz Chief Human Capital Officer

Claudio Diaz

Claudio Diaz

New York-based Marcum (FY15 net revenue of $412.4 million) has named Claudio Diaz as chief human capital officer.

In addition to recruiting and retention for the 16th largest accounting firm in the country, Diaz is responsible for managing human resources and benefits programs for about 1,500 Marcum employees and partners in the firm’s U.S. offices. He oversees a national team of human resources professionals providing support services in every Marcum region of the country.

Diaz has more than 25 years of human resources experience, including 12 years with a top 25 accounting and consulting firm with offices in the U.S. and abroad. His diverse career also includes HR experience in the manufacturing, health care and entertainment industries. He is an active member of the Society for Human Resource Management and has been a featured speaker at many national HR conferences.

“Claudio will play a leadership role in helping to manage Marcum’s ongoing growth both in our existing markets and in new regions as the firm’s footprint continues to expand,” says MP Jeffrey Weiner. “He will lead Marcum’s human resources team to help ensure that the firm’s human capital investment is realized to the fullest.”

Smith & Howard Launches Financial Search & Placement Practice

Blayne Shelton

Blayne Shelton

Smith & Howard of Atlanta (FY15 net revenue of $24.9 million) recently announced the launch of a new service offering: Financial Search & Placement, along with the addition of Blayne Shelton as director of the group.

“After fielding requests for staffing help from clients and financial professionals alike for several years, we decided it was time to put a formalized program in place,” says MP John Lucht. “Blayne brings not only a great blended background of accounting and recruiting, but also similar values and an approach that meshes well with our culture.”

Shelton has held a variety of roles in public accounting (including the Big 4) as well as industry. His clients in both arenas included small businesses as well as large public organizations and covered such areas as revenue recognition, real estate finance, derivative accounting and a range of consulting projects. He joined the executive recruiting side of the business when he returned to a consulting firm he had previously worked for. He combines his recruiting career with his accounting industry experience to connect with and place qualified financial professionals with businesses.

The Financial Search & Placement (FS&P) group creates ideal matches between professionals and businesses to staff CFO, controller, senior accountant, internal auditor, financial and business systems analyst, staff accountant and bookkeeper positions. If there is a financial role in a business, the FS&P group at Smith & Howard can find a fit.

While the FS&P group will focus on businesses in Georgia and the Southeast, the service can extend to locations in other areas of the U.S.

RSM Names Becker National Consulting Leader

Brian Becker

Brian Becker

Chicago-based RSM (FY16 net revenue of $1.85 billion) announced that Brian Becker has been appointed to serve as the firm’s national consulting leader, responsible for leading RSM’s growing consulting practice, which includes financial advisory, risk advisory, and technology and management consulting.

He will also serve as a member of RSM’s national leadership team, and report directly to MP and CEO Joe Adams.

“Brian is a strong and innovative leader who has shaped our technology and management consulting practice, which has been a strong contributor to the growth of RSM and the success of our clients,” Adams says. “I am confident our consulting practice will continue to provide outstanding service to clients, and support RSM’s journey to be the first-choice advisor to middle market leaders globally with Brian at the helm.”

Becker has held various leadership roles in RSM’s consulting practice since 1998, including his most recent roles as national technology and management consulting leader and leader of consulting in the firm’s Central region. He also served on the RSM board of directors from 2011–2015. Becker replaces Gary Sturisky, who has resigned from RSM to pursue other opportunities.

Monestime Named Chief Marketing Officer at Gray, Gray & Gray

Kelly Monestime

Kelly Monestime

Canton, Mass.-based Gray Gray & Gray (FY15 net revenue of $19.4 million) has announced that Kelly Monestime has been named chief marketing officer.

Monestime joined Gray Gray & Gray in 2004, and previously served as the firm’s director of marketing.

“Kelly Monestime has played a significant role in the growth of our firm over the past decade,” says MP Joe Ciccarello. “Her leadership of our marketing and business development efforts has been exemplary, and she and her team have succeeded in creating a clearly defined brand for the firm.”

BDO Consulting Expands Corporate Real Estate Advisory Services

Ross Forman

Ross Forman

BDO Consulting, a division of Chicago-based BDO USA (FY16 revenue of $1.29 billion), announced the expansion of its corporate real estate advisory services practice, appointing Ross Forman as managing director and leader of portfolio strategy.

Forman brings more than 25 years of strategic real estate management experience to his new role, where he will work with clients to evaluate their current real estate portfolio performance and identify opportunities to reduce cost and enhance operating efficiencies. The addition of portfolio strategy and performance optimization services is the latest in a series of moves by BDO Consulting to grow its corporate real estate advisory service offerings.

“In today’s competitive business environment, companies have recognized the impact that real estate choices can have on their bottom line,” says Michael Pappas, practice leader of corporate real estate advisory services at BDO Consulting. “Ross brings a strategic lens to our comprehensive service model that will marry savings opportunities at individual locations with overall portfolio performance optimization.”

Along with the expansion, the firm has implemented a new diagnostic methodology, which provides real-time, reliable, industry-specific data used for the critical analysis of clients’ real estate assets. The approach streamlines the benchmarking process.

“Changing workforce demographics, emerging technologies and an expanding global economy have underscored the need for a more sophisticated approach to corporate real estate,” says Forman, who served as the global real estate strategy lead at Accenture before joining BDO.

Weaver Names New Leaders

Robert Henry

Robert Henry

Fort Worth, Texas-based Weaver (FY16 net revenue of $104.3 million) has announced the appointments of Robert Henry as the PIC of tax and strategic business services for the central Texas region and Mark Watson as the PIC of tax quality and risk management.

“We are proud to have Mark and Robert in these leadership roles,” says John Mackel, Weaver’s MP and CEO. “Their leadership experience and technical knowledge will help drive excellence for our clients and our people.”

Mark Watson

Mark Watson

Henry joined Weaver in 2012. The foundation of his extensive career is assisting large and mid-size companies in the oil and gas, technology and manufacturing industries with income tax compliance, implementation of complex tax planning strategies and representation before the IRS. Additionally, he specializes in income tax issues associated with inventory valuation and the research and development tax credit. He is a frequent, sought-after speaker, providing valuable industry and technical insights to various professional audiences across the country.

Watson joined Weaver in 2013 and has more than 25 years of experience providing tax compliance and consulting services to businesses, individuals, estates and trusts. In his new role, Watson is responsible for ensuring that Weaver’s tax services satisfy the standards established by the IRS, the Texas State Board of Public Accountancy and the AICPA.

Cherry Bekaert Admits New Partner

Chase Wright

Chase Wright

Richmond, Va.-based Cherry Bekaert (FY16 net revenue of $164.2 million) announces that Chase Wright has been admitted as a new assurance and advisory partner with the Tampa, Fla., practice.

Wright will work with middle-market public corporations, private equity-backed businesses and private companies in the technology, life sciences, health services, manufacturing and distribution industries. He will also be a member of THInc, the specialty practice that focuses on guiding and helping clients maximize opportunities for innovation in the technology, health and life sciences and Industrial sectors.

Wright has more than 20 years of experience advising and auditing publicly traded and privately held companies, ranging from venture-backed startups to multi-billion-dollar SEC registrants. His background includes experience assisting companies with financial reporting and internal controls testing and optimization.

“Chase brings deep experience in the areas of IPO filings, SEC reporting, risk advisory and complex corporate finance issues,” says Christopher F. Rux, market leader of Cherry Bekaert’s Tampa Bay practice. “Our clients will greatly benefit from his knowledge and expertise as they continue to look for ways to expand and grow.”

Before joining Cherry Bekaert, Wright was an audit partner with a Big 4 accounting firm and a regional CPA firm.

Kennedy to Lead Business Development in Hudson Valley for PKF O’Connor Davies

Thomas Kennedy

Thomas Kennedy

New York-based PKF O’Connor Davies (FY15 net revenue of $123 million) has announced that partner Thomas Kennedy has been selected as to lead business development in the Hudson Valley region of New York.

Kennedy brings more than 20 years of experience to the role. He currently focuses on clients in the firm’s health care, not-for-profit, municipal and commercial practices.

“The Hudson Valley is a key priority for the firm, and Tom’s knowledge of local industry and business needs makes him the ideal fit for this expanded role,” says MP Kevin Keane.