Boards Failure to Implement CEO Succession Plans Lead to Expensive Compensation

I just finished watching a video of former General Electric CEO Jack Welch explaining why Chief Executive Officers (CEOs) can command such excessive compensation (salary, stocks, Golden Parachute severance package, etc). Welch reminds us that to not have a succession plan in place, Boards have to go out and “buy” a CEO to assume the risks, responsibilities, and liabilities of the company where the potential CEO does not have historical knowledge or networks. Further, Welch worries that Boards that lose sight of the original purpose – pick the CEO, understand the vision, ensure the company effectively moves towards that vision, and support the CEO so that the company can be profitable – in favor of micromanaging is a dangerous situation. Welch calls Board micromanaging absolutely outrageous and warns to stay away from such Board-micromanaged companies because it is a lousy place to go. Case in point is Hewlett Packard’s Carly Fiorina’s approximately twenty million ($20M) golden parachute severance. So what do you think?

[10:30-12:24] Boards’ responsibilities
[12:50-16:50] failure of Board to not have CEO succession planning leads to excessive compensation $$ and Golden Parachute severance packages