Perspectives

Calculating the cost of CEO succession planning

As published in NACD’s ‘Directorship' magazine

By Ian Dawson, Yi Yi, and Chase Bonin

Succession planning is a frequent topic of boardroom conversation. But as the average CEO tenure has decreased and scrutiny of CEO pay has surged, the dialogue may take on a new level of urgency. Such discussions have many dimensions, including whether the next CEO should come from within or be recruited externally.

We compiled information about 45 CEO transitions at S&P 500 companies from January 2022 to January 2024. The data reflect compensation details (base salary, target annual bonus, and the grant date fair value of “regular” annual equity awards) for both internal and external CEO hires. While the decision to promote from within or leverage external talent is specific to each company, our findings could be a starting point for boardroom conversations on succession strategy.

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