Board Membership 101: How to Hire a CEO

Chief executive officer selection and succession planning are among the most important responsibilities for any board of directors. In fact, some business writers will go so far as to say, “choosing the next CEO is the single most important decision a board of directors will make.” In the ever-changing corporate landscape, CEOs will come and go, which is why it’s important for boards to create a reliable process for how to hire a CEO for the organization they serve.
hiring a CEO

Most board members will tell you that finding and hiring the right CEO is a tall order. Directors know that a CEO’s influence and legacy can be felt for years after their departure—in both positive and negative ways, depending on the situation.

If the exiting CEO is merely retiring or moving on to another opportunity on good terms, it’s sensible to involve them in the hiring process. No one will understand the demands of the position quite like someone who has recently experienced them.

If the board lacks confidence in the CEO, though, the lead director should take charge of the process.

Finding the right candidates starts with taking a long, hard look at where your company is currently headed and where the board wants it to go. It’s important that directors look for candidates who will complement their vision for the future and will be able to tackle the challenges that the board can foresee. For instance, your company might be preparing to go public.

In that case, it would be prudent to seek out candidates who have experience leading a publicly listed company. Generally, the task of finding suitable candidates falls to the board’s nominating committee.

The selection process might involve the use of outside consultants or executive search advisors. Regardless, the process should be a transparent one for all members of the board. Once appropriate candidates have been identified, the board must lean on its internal procedures for evaluating how well each of them “fits” the culture of the company.

Cultural fit is pivotal to the long-term success of any organization—particularly in companies that have created a long-standing, positive and cultivating environment.

When the right successor has been found, the board must also submit an appropriate salary to the consideration of the candidate. In recent years, many companies have come under great scrutiny for high CEO pay. Since these decisions come straight from the board, directors must attract top-notch talent while also ensuring that they aren’t over spending to the detriment of the shareholders.

At the end of the day, the CEO sets the tone for any corporation. That’s why it’s important that the board brings their very best to the table when it comes to finding the right leader and planning for transitions between leadership.

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