Business is all about planning and preparing – for unexpected events as well as routine developments. But how would your company cope with the sudden death of the chief executive?: To avoid being plunged into dangerous turmoil you need a man with a plan.

Mulling over the prospect of death may not be very pleasant but we’ve all done it, and there’s always someone who hopes they’ll be “in the saddle” when their moment comes. But for a business, the sudden loss of one of its key executives can be catastrophic. It may be a grim prospect, but all companies – especially listed ones – have a responsibility to plan for such an eventuality.

Those that weather the storm of their CEO’s death can even end up in better shape than they were before, but for any that don’t the future can be bleak: training company Carter & Carter was forced into administration just 10 months after its CEO was killed in a helicopter accident.

Hugh Morrison, founder of M:Communications, says that when a CEO dies it is crucial to communicate “compassionate stability and a well-founded succession plan”. He stresses that “boards should always plan for the loss of key personnel at all levels of the organisation”, and that it’s important to recognise that the impact on stakeholders will vary.

“Different companies have different roles for the CEO, often depending on the strength and visibility of other board members – the chairman for instance,” he explains. “Those closest to a CEO will be most affected, but responsibility for key relationships must be assumed by others as soon as it is appropriate.”

 Jo Stonier, director with PR firm Quill Publicity Practitioners, suggests organisations should put

a PR contingency plan in place to respond to situations such as the death of a CEO.  “You can’t plan for every eventuality but a PR contingency plan will ensure time and effort is saved when the unexpected happens.”

“The aim of the plan is to ensure the organisation can make decisions and take swift action rather than being tied down with tasks and research that may distract from managing the crisis itself,” she explains. “Preparation is key – have a doomsday strategy in place and don’t underestimate preparation time.”

The plan should include an assessment of risk factors and a list of company policies and procedures, including directions on who can speak to the press and regulations to which the business must adhere. It should also contain background information on the company and commentary on the correct method of response to different crises – for example press conference, telephone, press release or advertisement.

But as well as dealing with the immediate situation, the plan needs to cover how the company is going to get back on track and spell out a review process so any necessary adjustments can be made to the plan once the dust has settled.

Know the form

“The most basic of all rules should be to ensure that all staff know who can and who cannot give comment to the press,” Stonier adds. “This information should form part of the staff handbook.” And attention needs to be paid to the detail. “For example, ensure lists of key journalists and communication details for key spokespeople and contacts during out of office hours are always up to date. Obviously these details would need tweaking depending on the crisis but this sort of preparation saves a lot of time,” she advises.

Stonier points out that “the communication department should be involved at the earliest stage of a crisis – as soon as there is a sniff of something happening. When a situation develops it will always be chaotic – co-ordination of information is still essential. And a debrief is very important; always do a learning review after the event”. And she warns: “Don’t ever think a story won’t leak because it probably will.”

As with any crisis, the CEO’s death needs four groups to be in the loop: the communication team, the executive team, spokespeople and the media. “In house teams should look for outside counsel as it is beneficial to get external, objective advice.”

Choosing the right spokesperson and responding appropriately is also important. As Stonier says: “This may not necessarily be the most senior person, but they should be believable, likeable and trustworthy. And get a response out as quickly as possible. No comment is the worse response you can give. Better to say that you will get back to them or can’t answer that question at the moment.”

There is a training issue here too. Stonier advises companies to “look into business contingency planning and ensure all crisis management training is completed for all relevant people. Bear in mind that press, television and radio are all very different media and should be factored into the training programme."

Reassure the market

One company that has recently dealt with this experience with aplomb is Anglo-Australian global oil explorer Roc Oil, which is listed in the UK and Australia.

Roc Oil’s former CEO, John Doran, died in June 2008, leaving the company that he founded bereft, but not rudderless. Providing privacy for Doran’s family, as well as support for the many staff that were close to him, was the company’s first concern.

Then, shareholders and other stakeholders were immediately reassured by the fact the company’s chair, Andrew Love, took charge, something that was quickly communicated to the market.

Aside from keeping the stock market informed and trying to respect the wishes of family members, a key concern was the reaction from staff. “We had to maintain communication and meet the genuine interest and concern from employees,” says Lynne Evans, corporate manager, HR and administration.
When it came to a succession plan for the company, the existing chief operating office, Bruce Clement, was officially named new CEO in late September 2008, but had already stepped into the role of acting CEO the moment Doran died. “Overall, I think we were well placed; there was no disruption to the business,” Evans says.

Evans’ advice to other companies in a similar situation is to focus on the simple things. “Put together succession plans and risk management frameworks. Also ensure staff personal details are up to date.”

It’s not just the forethought of succession planning that’s important; it’s the ability to be able to think quickly and make adjustments to events and announcements that have already been scheduled. Early in 2008 digital agency LBI’s prominent board member, Sven Skarendahl, died. In an announcement shortly afterward, Skarendahl was quoted praising a board member who was stepping down. The voice from the grave seemed inappropriate, not to say macabre, showing the importance of congruent communication. 

The communication department should be involved at the earliest stage of a crisis – as soon as there is a sniff of something happening... Don’t ever think a story won’t leak because it probably will

Expert advice

Mark Hynes, managing director of investor relations for PR Newswire and a prominent Investor Relations Society board member, notes how often succession planning comes up in investor discussions. “Quality of management is always a large component in the non-financial value drivers for analysts and investors, and keeping institutional investors involved makes sense. Investors need to be fully aware of what is planned, and the company should have a crisis communications plan in place in case of need. Item one clearly has to be the concerns of the family and whether they wish for immediate public recognition of the executive’s work, or want to focus on reassuring investors. The rest will depend on the circumstances,” says Hynes.
Whether the death was expected, and the extent to which the executive was personally associated with the success of the business – especially if he or she was the founder of the company, are some of the variables that will determine the communication program. Communication with retail investors and the customer base also needs to be considered – do they need reassurance the business will continue?

“In some continental European companies, the families of the executive have a golden or majority share, so their interests are both personal and financial, which can complicate things,” Hynes adds.

But Michael Berkeley, a director of PR firm Citigate Dewe Rogerson, believes it’s overkill to include the possibility of the death of the CEO as part of risk assessment.

“I’m not sure that it’s necessary, constructive or tasteful to assess the risk specifically of a CEO dying. Would you give the poor man or woman a death probability score?Would this be published in the company’s operating and financial review or risk assessment report, or a sign hung over his or her desk?’ asks Berkeley.  

“What is important is to have succession planning in place, and this should include contingency plans for early departure of the CEO for whatever reason, including death. Many firms, frankly, are not good at planning for succession. And the more a business is identified with a charismatic or long-standing CEO, the more important succession planning is,” he says.

According to Berkeley, companies should also question whether the chairman, CEO and CFO should travel by airplane together and should also investigate key person insurance, a type of insurance companies can take out to protect the business from the effect of the CEO dying. “It won’t replace the person, but it should mitigate the financial impact should the CEO die suddenly,” Berkeley points out.

From a corporate governance and leadership point of view, an early priority for a business without a plan is to have a person in charge and seen to be in charge.

“Whether it’s the chairman who temporarily takes on an executive function, or a natural number two such as the CFO or chief operating officer taking the role at least for an interim period, will clearly depend on the particular circumstances. But clarity is called for,” Berkeley emphasises. “Action should be reasonably swift – though not indecently so.”

Item one clearly has to be the concerns of the family and whether they wish for immediate public recognition of the executive’s work, or want to focus on reassuring investors. The rest will depend on the circumstances

Sympathy and support

With the business in the hands of an interim CEO, the board can progress the longer term succession plan in an orderly manner. However, it’s important to remember that many of the people most closely involved in the planning and communication process will be those who worked most closely with the CEO, so will be among those most emotionally affected. “Efficiency at corporate level should not take the place of providing sympathy and support at a personal level,” Berkeley believes.

He stresses the importance of personal considerations. At a such a time, family, friends, close colleagues and the wider employee base take precedence over all a company’s usual stakeholders. “It goes without saying that the family should be treated with enormous sympathy and sensitivity. There may well be shock – and resentment too, since stress and long hours put in at work may have contributed to the untimely death. There will be a need for practical support and advice.”

The company will be required to put out stock exchange announcements, arrange for internal communication, possibly help with obituaries and handle other corporate communication imperatives. Through all this, it is important to keep the family in mind, ensure they remain informed and remember they are the most important constituent at such a difficult time.

Businesses that manage this will find they are stronger and better managed at the end of the process than before the CEO’s death. Those that don’t face potentially serious damage to their operations or, as in Carter & Carter’s case, worse.