Boards: Could Your NED Be Your CEO Successor? 

NEDs bring invaluable industry experience, strategic insights and breadth of leadership credentials, making them highly suited for the CEO role. A known entity, their prior board involvement can allow for a smoother transition. 

Susanne Thorning-Lund presents key market statistics and shares insights from conversations with boards and several CEOs, who have transitioned from NED roles to executive leadership roles. Drawing on the growing trend of including NEDs in the CEO succession talent pool, the implications this pattern holds for boards and governance are examined. 

Current NED to CEO Activity 

There are notable examples of NEDs who have rotated into the CEO role, including: Allison Kirkby, CEO, BT Group plc; Dame Amanda Jayne Blanc, Group CEO, AVIVA plc; Lord Carter, Group CEO, Informa plc; and most recently, Cindy Rose, CEO, WPP plc. Whilst limited in scope and mindful of the index’s changeability, when analysing the journeys of FTSE 100 CEOs over a 10 year period from 2014 to 2024, we note an interesting uptick in the number of NEDs to CEO.

Between 2014 and 2019, typically only one CEO – out of an average of 13 FTSE 100 CEO appointments per year – would have stepped up from a NED role. This doubled to two in 2020, with three in 2022 and 2023, and two in 2024.   

The figures illustrate a growing acceptance and indeed potential advantage in promoting NEDs to CEO roles. However, when appointing a NED to a CEO role, there are factors which can impact the transition process, and the overall governance of the company. 

Succession Planning or an Emergency? 

CEO succession is one of the most critical - and complex - responsibilities a board faces, often undertaken at times of pressure and challenge. 

Countering those who might see the move as risk aversion, or poor succession planning, consider those boards who bring NEDs into the boardroom ‘with optionality’. Historically, boards will have referred to the potential to step into Board Chair or into Committee Chair roles. 

Increasingly, we are having wider conversations with boards.

It affords a board to ‘try before you buy’. As Allison Kirkby, CEO, BT Group plc, said: “From a board point of view, appointing a NED to CEO is a sensible leadership option as they have already been seen contributing, and interacting with board and management”. 

Today, a robust succession plan may include internal NEDs, who can step into the CEO role. David Stewart, former CEO of LSL Property Service plc, a company which has transitioned several NEDs into executive roles, said: “Stepping from a NED to an executive role can have real advantages. You’ve had the chance to observe the business and get a feel for its strengths and weaknesses whilst still being independent of much of the past. It can de-risk the appointment. But it’s vital that there is a real fit with what’s required in the job and the approach from the individual”.

Irrespective, a non-executive board role could present as an interesting next career move.  

The Human Aspects of a Hybrid Candidate

NEDs are already embedded in the organisation’s culture and well-versed in its strategic priorities, making them attractive candidates for CEO roles. The ’people bridge’, as Penny James, formerly Senior Independent Director at Hargreaves Lansdown and Co-Chair of the Women on Boards Review, described it, can be a real advantage. 

Touching on the implications of appointing a NED to a CEO role, Penny James continued: “For boards, this process has consequences, rather than risks. This isn’t a greater risk than hiring externally, but it has consequences around the rest of the board construct”.   

A board potentially stand to lose a good NED in the process. As a current CEO (formerly a NED) said: “In the beginning I was thinking ‘I’ll be fine and just continue as a NED if I don’t get it’, but once the process began for real, and I met everyone, the whole Board knew I was up for it. I realised I’d probably have to step away if I wasn’t successful”. 

A Note on Diversity 

The trend is more distinct among women. Four out of the six current FTSE 100 NED to CEOs are female which, at 40%, is a comparatively high proportion of the 10 female CEOs in the FTSE 100 at present. Of the current FTSE 250 NED to CEOs, however, are all male. 

As NEDs are no longer an afterthought, but a realistic option for Chairs to actively consider for CEO succession, it opens the pool for more female talent in top executive roles. 

Retaining Independence When (Perceived to be) Conflicted?

Given a CEO succession process often lasts several months, the Chair and boards should carefully think through how the NED can contribute to board discussions during the selection period. Their extensive experience, insights, and knowledge can be a significant asset to the board on critical topics but, “it can get tricky when the CEO wants to give a bullish statement and you know they are planning to leave”, said one NED to CEO. 

Whilst the individual may not be as independent as they once were, in situations where the Chair thinks an individual might be conflicted, the Chair can arrange to have a separate dialogue, so that the individual can continue to be a contributing member of the board on critical topics.

Allison Kirkby recalled: “I often thought during the process ‘How do I remain independent and challenging of management?’ Would I have been much more vocal if I hadn’t been in the process? Might others have thought I was making a point because I was in the process? Looking back now, I’m confident I got the balance right”. 

Part two of this article, published next week, will outline key transition learnings from CEOs who were previously NEDs. 

Odgers’ Board Practice has a long-established track record in supporting board transition, assisting organisations build balanced and effective boards. 

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