CEO Succession: Getting Your Successor on a Board

While some companies disapprove of their CEOs serving on another board, others recognize that sitting on the other side of the board table provides unique insights for a CEO and see it as an integral part of succession planning. To gain perspective on this issue, I spoke with Bill Mitchell, the chairman and former CEO of Arrow Electronics (ARW), who worked closely with his board on a comprehensive CEO succession plan over the past three years. Edited excerpts of our conversation follow:

What's your view of CEOs serving on the board of another company?

Serving as a board member is invaluable experience for any CEO. It gives you exposure to all of the machinery of how a board really works— including committees and executive sessions—which most company executives, particularly those who run business units, never get.

But perhaps more important is the insight it gives you on what it feels like to serve in a governance role as opposed to a management role. As soon as you go onto the board of another company, you immediately begin to say to yourself, "I'm going to sit here six times a year at board meetings, making huge decisions about the future of this company. How can I get sufficient knowledge to make these decisions?" That gives you a fundamental understanding of how your own board members are thinking about your company—and the issues you're bringing to them in board meetings.

In your own succession planning process, at what stage did you raise the issue of finding a board seat for your successor?

It was about three years prior to the time that we planned to transition the CEO role—and I would emphasize the importance of starting early on this. Boards only meet six or eight times a year; three years is nothing in terms of "board time."

Moreover, to find a board seat for your top candidates takes time and requires you to be personally involved. In our case, we had development plans for our top 10 executives. I met with each of them individually on those development plans and raised the topic of serving on an outside board in those conversations.

How did they respond?

The initial answer when you ask any of your executives whether they want to serve on another board is always "yes." But then you have to talk to them about what serving on another board really means in terms of time commitment.

For example, it is really tough for a sitting CFO to serve on another board because CFOs will nearly always be asked to serve on—if not chair—that company's audit committee. This means that every quarter that CFO will have to be concerned about signing off on two sets of financials— one for his/her own company and for the company whose audit committee he/she is serving on.

In these conversations with your executives, it's also important to get specific about what type of company and industry would interest them in terms of an outside board seat. They will have a conflict of interest if they served on the board of another company in your industry. So you have to get them to focus on other industries that they'd find interesting to learn about and get involved in.

Once you'd established their interest in serving on another board, what did you do to find potential board opportunities for them?

I met with the major search firms and I asked my succession candidates to do the same. I felt that my executives would be excellent board members, particularly as many of them were running multibillion-dollar international business units. I was therefore surprised by the reaction I got from my conversations with the search people who told me two things: First, given they'd never served on another board, finding them a board seat would be tough. Second, boards only wanted sitting CEOs. At this point I recognized that if I wanted to give my potential successors the opportunity to sit on another board, I was going to have to become personally involved and use my own network.

How did you use your own network to surface board opportunities for your successor candidates?

First, I went to three or four consulting firms Arrow was working with that I felt might have contacts at the board level with other companies. One was a strategy consulting firm, another was working with us on executive team building. These consultants knew our executives and had worked with them, so they could talk about them knowledgeably.

I also belong to a group of about 20 CEOs in Silicon Valley. I mentioned to this group that I would like to get some of my folks on other boards. I think it's important when you have these types of conversations to be as specific as possible. Don't just say, "Hey, we've got some good people if you're interested." Tell them a little bit about each person—what they have been doing at your company, what their background is, their areas of expertise, some personal information.

If I had it to do again, I would have also asked my board members to use their networks in the same way that I was doing.

Did you eventually find a board for your successor?

A: Yes, he was offered a board seat at AmerisourceBergen (ABC). That isn't the reason we decided to make him CEO, of course, but it worked out well that the person who ultimately became my successor was the one who had an opportunity to serve on another board.

Given how difficult it is to get a board position for a potential successor—you were only able to get one of your targeted people a seat, and it wasn't the reason he became CEO—do you still think it's worth investing the effort?

Easy answer. Absolutely, yes.

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