Gone but not Forgotten: CEO Retirement

 

 

Tom Flannery, Ph.D.

Senior Client Partner

Korn Ferry

February 13, 2018

Similarly, we are witnessing a trend whereby chief executive officers (CEO) want to retire but do not want to stop working. Effectively, the CEO is looking for a “second career.” However, we don’t often consider how that can impact an organization, both positively and negatively.

 

Over the past several years I have worked with boards on helping to create “second career” options for the CEO. The basis of this: the CEO is an asset that can be utilized for the benefit of the organization.

 

Three issues keep coming up when this subject hit the board's radar:

 

  1. When the current CEO retires, will the new CEO accept this arrangement?
  2. How do we avoid internal confusion about there being “two” CEO’s?
  3. What should the former CEO be paid?

The best approach to addressing concerns of the incoming CEO is to be clear in the recruitment process of the post-retirement arrangement and the plan for transition. When the new CEO accepts the position, it should be clear about the expectations for the former CEO and their role. This goes together with keeping the organization informed about the role of the old CEO and being clear that organization members cannot run to the former CEO to "help" with issues.

 

Our advice to clients includes:

 

  1. Locate the former CEO well away from the executive offices.
  2. Define the role and reporting relationship. In many cases, the former CEO reports to the new CEO. In very few cases does the previous CEO report to the chair of the board or committee.
  3. Prepare a position description that clearly describes the position, its accountabilities, and measures of success.
  4. The former CEO should not attend board or committee meetings unless invited for specific issues and accompanies the new CEO.
  5. Establish a process to ensure the position adds value and monitor the former CEO’s contribution.
  6. Keep clear documentation of the value the position provides and activities where the former CEO is involved.
  7. Compensate the former CEO based on a similar role in similar organizations. This way the organization can establish the compensation is reasonable for the contributions provided.
  8. Confidently communicate to the organization and board the role of the former CEO. Make it clear that it is not appropriate to include the old CEO in the decision process independent of the new CEO.
  9. Make it clear that the board looks to the new CEO for their leadership.
  10. Periodically monitor the arrangement to ensure it is meeting the objectives of the organization.

 

While the politics of retirement can be contentious, they do not have to be. With a thoughtful approach and clear expectations, retiring executives can still serve their institution and support their successor.

 

tom.flannery@kornferry.com

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