News May 2016 Succession planning should be aligned to company strategy

Succession planning should be aligned to company strategy

23 May 2016

The Financial Reporting Council (FRC) has issued a feedback statement on its discussion paper, UK Board Succession Planning (PDF), which sought views on issues surrounding board succession for both executives and non‑executives.

An active nomination committee is key to promoting effective board succession. Committees should consider carefully the future membership of their boards and ensure that this is aligned to company strategy, both current and future.

FRC Chairman, Sir Win Bischoff commented: "We were pleased to have received so many valuable insights into board succession. Companies which plan ahead effectively for board renewal are more likely to achieve a better combination of diverse skills and experience needed for long‑term success. The nomination committee should also consider its role in developing the talent pipeline within the company.”

There was some support for further guidance, in particular on the issues of the role of the nomination committee and reporting on succession planning. Given the strong links with the FRC’s Culture Coalition Project, guidance in this area will be considered as part of the revision of the Guidance on Board Effectiveness, which will begin later this year. The FRC has committed to avoiding further updates to the UK Corporate Governance Code until at least 2019.

Notes to editors:

1.  The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.