Richard Alsop, John J. Cannon III, and Doreen E. Lilienfeld are partners at Shearman & Sterling LLP. This post is based on a Shearman & Sterling memorandum by Mr. Alsop, Mr. Cannon, Ms. Lilienfeld, Gillian Emmett Moldowan, Lona Nallengara, and Linda Rappaport.
Planning for an unexpected absence or loss of a key person is an important component of enterprise risk management. In the present environment, boards are meeting regularly in real time to address absences of key persons–both temporary and sustained–to ensure that their existing succession plans are withstanding the current test. Another added challenge for some companies has been the need to address multiple absences occurring at the same time. This post briefly discusses best practices and key considerations for companies and their boards as they confront these possibilities in light of the COVID-19 pandemic.
Identifying an Immediate Successor or Interim Replacement
An unexpected absence or loss of a key person can adversely impact a company’s ongoing operations, stock price, employee morale and overall short-term stability. Therefore, effective risk management requires identifying the individuals within the organization who have the skills and experience to immediately and effectively fill any gaps. Potential successors must also be perceived by the market as having the necessary experience to fill the role.