Edward Bennett has done wonders at Astar Enterprises. In the 15 years he's been CEO, the company has more than tripled in size through product line extension and disciplined acquisitions and is now distributing its cleaning, personal hygiene, and skin care products nationwide.
But Astar's chief executive is 64 years old, and while all his attention is taken up with a new strategy to expand into international markets, board members are becoming increasingly worried about the issue of succession. Bennett wants none of it, arguing that if he were to die suddenly, his second in command, Tom Terrell, could take over. Besides, after much prodding, Bennett, former vice-chairman Vincent Dalton, and longtime HR head Gail Thompson have already come up with a list of four possibilities. "When will these guys back off?" Bennett complains to Thompson. "I've told them who the candidates are. Why do we need to talk about it?" Thompson knows, however, that the board chairman, Tom Calloway, considers Terrell a nonstarter without the requisite skills to take over in anything more than an interim capacity. As for the other three candidates, only one is even known to the board, and none has any significant international experience. Calloway is well aware of how critical Bennett is to Astar. But he's equally certain that the board risks failing in its fiduciary responsibilities if it doesn't create a viable succession plan. What should Calloway and the board do if Bennett refuses to cooperate? Commenting on this fictional case study in R0609A and R0609Z are John W. Rowe, the executive chairman of Aetna; Edward Reilly, the president and CEO of the American Management Association; Jay A. Conger, a professor at Claremont McKenna College and London Business School; Douglas A. Ready, a visiting professor at London Business School; and Michael Jordan, the CEO of EDS. This HBR case study includes both the case and the commentary. For teaching purposes, this reprint is also available in two other versions: case study only, reprint R0609X, and commentary only, reprint R0609Z.
Tom Calloway, nonexecutive chairman of Astar Enterprises
Edward Bennett, Astar’s CEO
presentation and lead a discussion on succession planning at the upcoming board meeting
Astar had recently initiated a major global expansion, and as the public face of the company and a dynamic speaker, Bennett had been centrally involved in the road shows required to secure equity funding from the investment banks.
Under Bennett’s leadership during the past 15 years, the company had more than tripled in size and begun nationwide distribution.
This growth had been accomplished through product line extension as well as a disciplined acquisition strategy
The new global strategy was expected to increase revenues to $5 billion within three years
Astar would have to move quickly to secure distribution in Europe and Asia and build its regional sales, service, and manufacturing capabilities before its much larger and better-established competitors could preempt the company’s strategy
Ann Rinaldi, head of the compensation committee - Astar’s stock price and bond ratings would take a major hit if Bennett were to leave or be incapacitated unexpectedly
Fred Henderson – the lack of attention to CEO succession at Astar was a major lapse in the board’s fiduciary responsibilities, as well as a possible violation of SEC regulations and the rules governing listings on the New York Stock Exchange
Gail Thompson, Astar’s veteran senior vice president of human resources
Astar’s former vice chairman, Vincent Dalton
In Bennett’s mind, the board’s “sudden interest”in succession planning would merely distract his team from the strategic tasks at hand
Tom Terrell, the current vice chairman
Marianne Klein, executive vice president of corporate services
Robert Glenn, head of Astar’s Consumer Products Group
Brian Jacobs, the vice president of sales and marketing...
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