CHAPTER 03 CEO Succession Trends and Best Practices
a material change report. Of the TSX -listed issuers reviewed, most that filed a material change report did so in connection with a sudden or unexpected CEO departure. – Transition period. In situations in which the succession appeared to be a planned process, the average notice the issuer gave to the market was 108 days. However, there were still circumstances in which planned successions were announced with little or no notice. For example, TSX-listed Transat A.T. Inc. announced its CEO’s retirement on May 26, 2021, with his successor taking over the role the following day. In January 2022, Montréal-based Fiera Capital Corp. announced the appointment of a new CEO a full year before the company had initially planned in its three- year succession plan. The appointment took effect retroactively on January 1, 2022. – Impact on share price. Our data show some correlation between the amount of notice provided to
the market of a CEO’s departure and the company’s share price. As illustrated by Figure 3-1, companies that provided more notice experienced less volatility and no significant change in their one-day share price, whereas those that provided little to no notice saw their share price decline by an average of 2%. Generally, share prices improved within one week or one month following the announcement. – S everance. The press releases announcing CEOs’ departures did not all disclose severance details. In cases in which the departure was forced and the market reaction negative, severance details were typically outlined in the corresponding material change report or Form 8-K. Although disclosure is required in the company’s annual management information circular, disclosing the terms or key components of the severance package contemporaneously with disclosure of the change is encouraged in order to maximize transparency.
FIGURE 3-1: Change in Share Price vis-à-vis Length of Notice of CEO Departure (%)
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R 2 = 0.40
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Length of Notice (Days)
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Davies | dwpv.com
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