The Challenges and Opportunities of CEO Succession

This story is based on Mary McBride’s appearance on the Executive Session podcast.

Few moments test a board’s leadership more than a CEO transition. Whether carefully planned or abrupt, the process brings unique challenges for the company, management team and the board itself. Mary McBride, director of Intrepid Potash and Ellington Credit Company and former director of CatchMark Timber Trust, has seen firsthand the complexities of succession and the vital role boards must play in steering companies through one of the most consequential events in corporate life.

McBride emphasizes that CEO succession is both a governance obligation and a cultural turning point. Boards must balance the search for the right leader, the need to keep internal candidates engaged, the sensitivities of a departing CEO and the imperative to support a new leader once chosen.

The Challenges of Transition

At the outset of a succession process, boards face a critical decision: whether to elevate an internal candidate or launch an external search. “If there’s a readily available internal candidate that everyone agrees on, the process can be fairly straightforward,” says McBride. “But those instances are rare. Most boards feel an obligation to do a search.”

That search often involves hiring a recruiting firm and evaluating both external and internal candidates. Yet, the process can create tension with internal contenders who may feel sidelined. McBride underscores the importance of communication. “The board needs to be clear: Is this a perfunctory search or are we truly looking at alternatives? And if an external candidate is chosen, what role does the internal candidate have going forward?”

Another delicate question is the role of the outgoing CEO. While their insights into internal talent are invaluable, McBride stresses the decision ultimately rests with the board. “It’s the board’s role to choose the new CEO, not the role of the existing CEO,” says McBride. Clarity about that distinction prevents misalignment and helps the board move the company in the direction it believes is best.

The complexity multiplies if the CEO departs abruptly, due to health issues, termination or another sudden event. In such cases, an interim leader, often an internal candidate, steps in. “The board has to be super involved,” says McBride, noting directors may find themselves on weekly calls with interim leadership, both to support day-to-day management and to advance the search.

The Board’s Responsibilities

While the full board must ultimately approve the next CEO, McBride points to the nom/gov committee as the group that does the heavy lifting. This includes engaging the search firm, conducting early interviews and narrowing the field. “But when it comes down to the final candidates, it involves the entire board,” says McBride. “The new CEO will want to meet the entire board, and the entire board must be aligned.”

Another critical responsibility is structuring the new CEO’s compensation package. Boards typically rely on external consultants to benchmark the market, but McBride notes the board must interpret that data in the context of the company’s existing pay philosophy. “The last thing you want is a CEO package misaligned with the pay package of your executive team,” she says. “Compensation should incentivize consistent behaviors across the leadership team.”

The approach also differs depending on whether the hire is internal or external. An internal candidate knows the company well, but boards must help both the executive team and the new CEO adjust to changed dynamics. “You need to make sure the person is treated as CEO, not as the peer they once were,” says McBride. With an external candidate, by contrast, the board must invest in relationship-building. “It’s about constant communication — dinners, meetings, conversations that help the new leader understand the culture and where changes are needed.”

Supporting the New CEO

Once a new CEO is in place, the board’s role shifts from selection to support. McBride highlights the importance of communication and structured check-ins. “Most boards ask the new CEO for a 100-day plan. Then it’s critical to follow up. Did they achieve what we wanted or do we want them to focus elsewhere?”

Boards must also be mindful not to undermine a new CEO, particularly if directors have long-standing relationships with senior executives. “If you’re close to the CFO, it’s easy to keep going to them for answers,” says McBride. “But you hired a CEO; let them be the CEO. Integration requires discipline from the board, too.”

Respecting the Departing CEO

While much focus is on the incoming leader, boards also have obligations to the departing one. McBride stresses the importance of recognition. “CEOs are deeply engaged in their companies. Exiting can be hard. Acknowledging their contributions with internal events or communications is important.”

Compensation matters must also be resolved cleanly. “Tie up the package early so it doesn’t muddy the waters,” says McBride. Transition periods, if any, should be short, typically no more than three months. Longer consulting agreements, she notes, are generally symbolic, with little active involvement.

A Defining Board Responsibility

McBride frames CEO succession as one of the defining duties of directors. “It’s stressful for both the board and the company,” she acknowledges. But with communication, alignment and clarity of roles, boards can turn transitions into opportunities. By honoring the past, supporting the present and focusing on the future, directors ensure that leadership change strengthens rather than destabilizes the company.

“Succession is more than a search,” says McBride. “It’s about governance, culture and continuity. And it’s one of the most important responsibilities a board will ever have.”