feisty
CEO succession is the board responsibility that gets the most airtime in governance forums and produces the most spectacular failures in practice. ASX-listed companies spend years cultivating succession pipelines, briefing investors on the depth of their leadership bench, and commissioning executive search firms to map the external market. Then the plan collapses, and a board that spent a decade preparing has days to respond.
The collapse can take a few shapes. The designated successor leaves for a competitor before the current CEO steps down. A sudden health event removes the incumbent with no notice. An internal candidate who looked credible at a distance turns out to be politically unacceptable to the leadership team once the appointment becomes real. Or the board simply misjudges the timeline, and investor pressure forces a change two years earlier than the road map assumed.
Why succession plans break down more often than boards admit
The governance literature treats succession as a planning problem. Build the pipeline, identify the candidates, run the development programs. What it underweights is that succession is also a political problem. The internal candidate who boards most often develop is the one the outgoing CEO is comfortable championing. That person's strengths tend to mirror those of the incumbent rather than reflect what the company needs next. The board discovers this mismatch late, usually after the candidate has been publicly positioned as heir apparent.
Boards also underestimate how much the departure of a strong internal candidate destabilises the next layer of leadership. When the number two leaves, the number three and four often follow. This is the succession plan failing twice: once at the top, and again underneath.
Research on insider CEO promotions shows that boards prefer internal candidates for good structural reasons, including cultural continuity and faster onboarding. But the same preference creates an over-reliance on a single named successor, which is precisely the fragility that makes the plan brittle.
The emergency appointment and its costs
When the plan breaks down, the board's first move is usually to appoint an interim CEO. This is almost always the executive chair, the outgoing CEO on a short extension, or a senior independent director willing to step into an operational role. The interim signals stability to the market. It also buys the board time to run a proper process without appearing to panic.
The costs of an emergency appointment are real. An interim CEO rarely makes the structural decisions the company needs, because doing so would pre-empt the permanent hire. Capital allocation slows. Strategic initiatives get deferred. The leadership team operates in a holding pattern, watching and waiting. At companies that needed a decisive change of direction, a six-month interim can cost more than the search it was meant to protect.
The executive search itself then runs hotter than a planned process. When the board is operating under visible pressure, the compensation package inflates. Search firms know the board is motivated. External candidates know it too. The ASX 200 has produced several cases where a failed succession process resulted in a CEO paid 30 to 40 percent above the departing incumbent's total remuneration, not because the market rate changed but because the negotiating dynamic did.
What the board reveals about itself in the process
A failed succession plan is an information event. It tells shareholders something about the quality of the board's planning horizon, its relationship with the executive team, and the power dynamics inside the boardroom. When it becomes public knowledge that the identified successor has left, or that the board has had to abandon its preferred timeline, investors read that as a governance signal.
The chair's handling of the period immediately after the failure matters more than the eventual appointment. Chairs who communicate clearly, set a credible timeline for the permanent hire, and are transparent about why the original plan changed tend to contain the reputational damage. Chairs who stay silent or manage the story awkwardly compound it.
This is one reason why the question of who chairs the board and how that person operates under pressure has become a meaningful variable in how governance failures are absorbed. The chair doesn't make the succession call alone, but the chair owns the communication and the relationship with major shareholders in the weeks that follow.
External hires after a failed plan: what the evidence shows
When a succession plan fails, boards are more likely to go external than they would have been under an orderly process. This is partly because the internal pipeline has been disrupted. It's also because the board wants to signal change, both to the market and internally to a leadership team that may be unsettled.
External hires after a failed succession tend to come from a narrower candidate pool than planned searches produce. The timeline is compressed, the brief is less precise, and the board's risk appetite shifts toward the known quantity: a sitting CEO at a comparable company, or a former CEO with a clean track record. This is not always the wrong call. It is frequently a more expensive one.
The post-appointment period is where external hires from emergency processes most often struggle. Without the institutional knowledge that an internal candidate carries, the new CEO spends longer building context. The leadership team around them is less stable than it would have been under a planned transition. And the board, having just lived through a failure, is sometimes less patient than the situation warrants.
What a better process actually looks like
Boards that handle succession failures well share a few practices. They maintain two named succession candidates rather than one, which reduces the single point of failure. They brief those candidates explicitly on their status, which reduces the likelihood of losing them to a competitor without warning. They also run the external market mapping exercise on a rolling basis, not just when a vacancy opens, so they're not starting from zero in a crisis.
The CFO seat is a useful analogy here. Boards that think carefully about financial leadership appointments and succession at the CFO level tend to have more structured frameworks for assessing internal readiness across the senior team. The discipline applied to one appointment eventually shapes how the board thinks about the CEO pipeline.
None of this eliminates the risk of a plan collapsing. A CEO who leaves unexpectedly, a health event, a board relationship that breaks down: these are not fully plannable. What changes with better process is the recovery time and the cost of the emergency. Boards that have invested in the pipeline don't panic-hire. They move to their second option, communicate with clarity, and complete the transition without the market reading chaos into every statement.
The succession plan that never gets tested is the one everyone praises. The plan that fails is the one that shows whether the board actually built something real, or just a document that looked credible at the annual governance review.