One billion pounds. That’s the estimated annual market value destruction caused by poorly managed CEO transitions across the S&P 1500. One billion pounds. And yet, only 21 percent of directors rate their succession planning process as excellent. The gap between stakes and execution is the widest in corporate governance.
In the financial services sector, where regulatory scrutiny is intense and investor expectations are precise, CEO succession is simultaneously the board’s most important job and the one most of them are not doing well enough.
The numbers are stark. Thirteen percent of S&P 500 companies announced CEO successions in 2025. When an unexpected retirement or illness arrives, even well-run boards can find themselves scrambling. Many are still recruiting the next Chief Executive when the current one walks out the door. Others are working from a shortlist that would have been stronger if the internal pipeline had been built earlier.
Why succession fails, in three ways
Too late. Succession planning often begins when the incumbent is in year seven of an eight-year tenure. By then, the pipeline is thin. The candidates who might have developed into succession material have already moved to competitors. The board is choosing from what’s left, not from what’s best.
Too narrow. Many succession conversations never escape the CFO, the Chief Operating Officer, and whoever the current Chief Executive has mentally anointed (which is often not who the board would choose). Succession planning that doesn’t look across the business, across grades, across geographies, is succession planning that produces a shortlist of three people, all of whom have worked together, all of whom share the same blindspots.
Too focused on external candidates. The market for Chief Executives is expensive, high-risk, and increasingly competitive. Yet many boards treat external recruitment as a first option rather than a last resort. This is particularly striking in financial services, where a first-time Chief Executive in a regulated environment has no margin for learning.
The board that waits for succession to become urgent is already in crisis mode. They’re just negotiating the terms of surrender.
What the regulators now expect
The Senior Managers and Certification Regime — introduced by the Financial Conduct Authority and the Prudential Regulation Authority to tighten individual accountability for regulatory breaches — has a direct consequence for boards: succession planning is no longer a strategic preference. It is a regulatory obligation.
The regulatory framework makes clear that the board is responsible for ensuring the organisation has a credible pipeline of future leaders. In practice, that means the board must be able to demonstrate: a standing pipeline of identified successors at all key levels; active development programmes that are not theoretical exercises; a process that is refreshed regularly, not annually; and clear understanding of skill gaps, retirement risk, and the time required to develop candidates into readiness.
This is not a checkbox exercise. The regulator will ask to see the succession plans. They will understand immediately if this is genuine work or if this is a folder opened three months before the next board inspection.
18—24 months of targeted development required for most internal candidates to reach credible readiness for CEO-level roles. This assumes the candidate was identified 18—24 months before the role became available. Start planning now for a succession 18—24 months from now, and you’re already behind. — Spencer Stuart / Korn Ferry analysis, 2025
The development window is non-negotiable. A Chief Executive moving into a regulated financial services environment — whether in banking, wealth management, or insurance — cannot afford a six-month onboarding period. The stakes are too high, the scrutiny too immediate, the regulatory consequences too sharp. That means the candidate must be substantially ready on day one, which means the development work must start years before the transition.
What succession actually looks like
In the boards that do this well, I observe several consistent patterns.
First, succession is a standing agenda item. Not a “succession planning workshop” in September; not an annual review buried in a governance committee meeting. Standing business. Every board paper on organisational structure, senior appointments, and executive development is checked against the succession pipeline. If the pipeline moves, the board knows immediately.
Second, the board owns the identification, not the Chief Executive. The current Chief Executive has a conflict of interest (however well-intentioned) and inevitably narrows the field. The board must actively search for candidates, must see them in action, must understand their capabilities directly. That means giving successor candidates substantive stretch assignments, not tokenistic board exposure.
Third, skills gaps are mapped forward, not discovered retrospectively. What will the next Chief Executive need to do that the current one did not? If the next phase is about artificial intelligence and operational resilience, the current pipeline must reflect that. Candidates are assessed not just on whether they can run the current business, but whether they can transition the business into what’s needed next (which I’ll note requires the board to have thought clearly about what’s needed next — no small achievement, in my experience).
Fourth, external recruitment is planned for, not rushed. If an internal candidate isn’t emerging, the board should know this years in advance, not days. That gives time to recruit someone into a development role, to bring them up the curve, to assess their fit with culture and regulatory expectations.
CEO succession is the board’s highest-stakes decision. It determines whether the next decade is managed by someone who understands the organisation and knows its people, or whether it starts with a five-month scramble to fill a vacancy that could have been anticipated. The cost difference is not small. Neither is the risk.
Domi Alzapiedi is a Chief People Officer in banking, focused on the intersection of people strategy, organisational design, and commercial performance. She writes about the questions that keep leadership teams honest.