Companies' plans for replacing key managers have been grabbing headlines since Apple disclosed in January that CEO Steve Jobs was taking another medical leave of absence. Shareholders want to know companies' succession plans, although directors may not be very concerned about the issue.
The Laborers' International Union of North America has filed a proposal with 10 companies to have succession planning put to a shareholder vote this year. The proposal asks companies to provide an annual report on CEO succession plans. Four--Hewlett-Packard, SunTrust Banks, Edison International and Jarden--have adopted proposals, says David Miller, a LiUNA spokesman. Apple's shareholders rejected the proposal. The five other companies are Bank of America, PG&E, Allstate, Intel and Red Robin.
"In addition, Whole Foods, Verizon and Comcast agreed to make additional disclosures on succession before we formally filed proposals this year," Miller says.
In 2010, LiUNA filed succession proposals with 10 companies, five of which adopted the proposal.The Securities and Exchange Commission only began to allow such measures in October 2009, after blocking them for years as a matter beyond the concern of shareholders.
Jessica Lochmann, a partner in Foley & Lardner's transactional and securities practice in Milwaukee, notes that the proposals are not binding on directors, who view the hiring and supervising of managers as one of their key responsibilities.
Companies may hesitate to disclose succession plans because they fear it will disrupt internal operations or give competitors insights into company strategy, Lochmann says.
Recent corporate failures are contributing to the spate of succession proposals, she says, because shareholders want as much information as they can get about the companies in which they have invested, including whether a different management team might have done a better job.
Despite the proxy proposals, directors seem content with the job they and their managers are doing planning for the future. A 2010 PricewaterhouseCoopers survey of public companies found almost 70% of directors are happy with their companies' succession planning, and a November 2010 PWC report on issues that should concern directors in 2011 did not even list succession planning, focusing on financial reporting, executive compensation, economic growth, taxes and other issues.
For more on this year's proxy issues, see Shareholders Target Politics.