If there’s one thing worse than being in the headlines for poor company performance, it’s being there for boardroom antics. Asda has suffered both, so something had to give.
In September, chairman and former Marks & Spencer boss Stuart Rose assumed interim control of the supermarket chain, after publicly calling for de facto CEO Mohsin Issa to step down.
In such circumstances, it’s not unusual for a chair to step into the breach. Rose may well have preferred not to take executive responsibility for a major firm again in his 70s, but few can dispute that he is a safe pair of hands in the interim.
He knows how to lead in the sector, he’s deeply respected and he understands the business inside-out. He can also clearly work with the Asda board and its majority shareholder, TDR Capital, without de-stabilising the rest of the executive, including CFO Michael Gleeson.
A smooth transition
Under normal circumstances boards aim for succession to be seamless. They have a clear sense of the kind of CEO the business needs, carefully search for candidates with the right skills and then send off the outgoing leader in an amiable and orderly way.
Hiring the chair as an organisation’s next CEO is not an outcome a board aims for but an emergency manoeuvre.
However the chair is often one person in the boardroom with pedigree and industry knowledge. This raises an intriguing question: is there any merit in appointing non-executive directors (NEDs) as CEOs more generally?
Making the move
Non-executive directors becoming CEOs is not unprecedented. In 2023, BT announced Allison Kirkby would become chief executive after four years as an NED. In the same year, Nish Kankiwala became the first CEO of the John Lewis Partnership after two years on its board, while Hein Schumacher took over at Unilever after a year as an NED.
Nor is the move particularly new. In 2014, Euan Sutherland moved from an NED position at Superdry owner SuperGroup and in 2013 Roger Whiteside followed the same path at Greggs.
This hiring strategy has its merits, not least that the board has plenty of time to get to know the potential CEO and understand what they have to offer. However, whether it’s effective largely depends on the circumstances of their appointment.
The pros and cons of NEDs becoming CEOs
Bringing someone onto the board specifically as a prelude to becoming CEO – or as a form of extended, hands-off job interview – isn’t counsel I would give under usual circumstances. It risks trying to do two things well and failing at both. In fact, in over 20 years as a headhunter, not a single board has asked me to recruit an NED with CEO potential.
It’s iffy governance if the current CEO suspects board members may be after their job and it makes it less likely that the CEO-in-waiting will be able to perform their supervisory and supporting duties as a non-executive authentically, knowing what lies on the horizon.
It’s also likely to spoil the board dynamics, if the other directors know that one of their number is only there because they’ve been promised an executive role. If the other directors don’t know, it’s even worse. There’s enough politics in the boardroom as it is. As such, a deliberate attempt to become a CEO via an NED appointment is doomed to failure.
But it’s a different situation when the board looks for its next CEO and happens to find them among its own ranks. Internal appointments make a good deal of sense provided that there has been a wide-ranging search and there is clarity of intent.
Recruiting the best people to boards can lead to remarkable outcomes. I’m sure we will continue to see NEDs transition to successful CEOs but boards must ensure this is in the best interests of the organisation and not a quick fix.
Orlando Martins is a board advisor, organisational strategist and headhunter. He founded ORESA Executive Search in 2008 and GrowthIndex.com, which ranks and celebrates the fastest-growing UK companies.
