514 Making Key Strategic Decisions
At one company the authors are familiar with, the chairman and CEO
held an annual meeting of the outside directors to discuss succession. He re-
ferred to it as the “truck meeting” because he always started with the question,
“Suppose I am run over by a truck tomorrow. What will you do?” At this meet-
ing, two, and sometimes three, managers were identified as potential CEOs.
Individuals were added to or eliminated from the list and their relative ranking
changed. When this process works properly, an agreed upon CEO candidate is
available in an emergency, and a person who will take over from a retiring
CEO in normal succession is identified.
If boards fail to deal effectively with succession, they may be forced to go
outside the company for a new CEO. Under most circumstances, this increases
the risk that the CEO will not succeed since chances for a successful succes-
sion are usually better when the CEO position is filled by a proven executive
from within the organization. In some cases, an organization may need a “shak-
ing up” and the board may elect to go outside for a CEO who can give the or-
ganization new life.
NORMAL BOARD MEETINGS
Most boards meet eight, nine, or ten times a year. Some meet only quarterly,
and a few meet every month. The typical meeting lasts two to three hours, but
it may go considerably longer if contentious issues arise.
Premeeting Material
Prior to the meeting, board members are sent an agenda and a packet of mate-
rial on topics to be discussed. This homework usually requires several hours of
work. Directors may query the CEO, in person or by a phone call before the
meeting, on matters that require clarification.
Current Situation and Outlook
The first substantive topic on a meeting’s agenda usually is a discussion of cur-
rent information about the company and its outlook. The CEO leads this dis-
cussion, perhaps delegating part of it to another senior officer. Much of the
information is financial—that is, condensed income statements for each divi-
sion or for groups of division, corporate expenses, and key balance sheet items,
such as inventory and receivable amounts. There are three ways to present this
financial information:
- Compare management’s current estimate of performance for the whole
year with budgeted performance for the year. What is the current esti-
mate of how the company will perform for the whole year? This is the
most important type of information. However, it is also the most sensitive,
and many CEOs do not circulate it prior to the meeting.