The Governance Blind Spot: Part One: Why CEO Succession Remains Boards’ Weakest Capability

CEO succession remains one of the most consistently weak governance capabilities across Australian and global boards, despite being among the highest-impact decisions a board will ever make. The Australian Institute of Company Directors has repeatedly warned that inadequate CEO succession planning exposes organisations to unnecessary risk, particularly during periods of disruption or crisis

Its research highlights a persistent “succession gap”; boards acknowledge the importance of leadership continuity, yet fail to treat succession as a structured, ongoing governance discipline.

This gap is reinforced by recent performance data. BoardOutlook’s insights show that director confidence in internal CEO candidates remains low, with visibility of the talent pipeline one of the weakest-rated governance markers.

Steve Pell, CEO of BoardOutlook, describes CEO succession as a “blind spot hiding in plain sight”. This aligns closely with AICD commentary, which notes that boards often defer succession planning to the incumbent CEO, review it infrequently, or rely on informal assumptions about future leaders rather than documented, tested plans.

AICD guidance is clear: effective succession planning requires early identification of potential successors, deliberate development pathways, regular board review, and readiness for both planned and unplanned transitions. Where these elements are absent, organisations are forced into reactive decision-making, often at the worst possible moment.

Real-World Example 1: The Walt Disney Company – Repeated Emergency Succession Failures

Problem

Disney experienced two high-profile succession disruptions in quick succession. In 2020, long-time CEO Bob Iger stepped down abruptly, with Bob Chapek appointed following a compressed transition. In 2022, Chapek was unexpectedly removed after strategic missteps, cultural issues, and mounting investor dissatisfaction.

Governance failure

Despite succession being a known issue internally for years, the board lacked a robust, board-owned pipeline of CEO-ready executives. This reflects the exact risk identified by AICD: boards that assume stability or rely on ad hoc processes leave themselves exposed when conditions change.

Fix

Disney reinstated Iger on an interim basis and implemented a more formal, multi-year succession framework. This included external advisory support, clearer development expectations for identified executives, and more frequent board oversight. Succession is now reviewed quarterly rather than treated as an annual compliance item. The case reinforces AICD’s position that succession cannot be left to the CEO alone and must be actively governed by the board.

Real-World Example 2: Boeing – Crisis Exposed a Thin Leadership Bench

Problem

Following the 737 MAX crisis, Boeing’s CEO resigned suddenly in 2019. With no internal successor ready, the board elevated the Chairman, David Calhoun, into the CEO role as an emergency measure.

Governance failure

The lack of CEO-ready internal candidates highlighted years of underinvestment in leadership development and exposure. As AICD has noted in its analysis of succession failures, boards often overestimate the strength of their internal bench until it is tested under pressure.

Fix

Boeing subsequently refreshed its leadership development strategy, increased external benchmarking, and invested in earlier identification and preparation of potential successors. Succession planning became more explicit, structured, and visible at board level.

Boards across Australia face the same structural risks seen in these global examples. CEO succession must be treated as a standing governance priority; structured, deliberate, and regularly stress-tested. When boards fail to close the succession gap, they are not merely postponing a future decision; they are actively increasing organisational risk in the present.