Boardroom directors are exposing themselves to a massive risk, dubbed the ‘Sorrell effect’, by not having executive succession plans in place, warn senior leadership experts.
The abrupt exit of Sir Martin Sorrell from advertising giant WPP – and his subsequent rapid return to the marketplace – has highlighted the risks faced by businesses where no effective succession plan is in place to replace a long-standing and influential leader.
Global business leaders are being courted for the role, which Sir Martin Sorrell held for more than 30 years, before exiting.
Reports now suggest that Sorrell will quickly bounce back into the marketplace because of the nature of the contract he had at WPP. Instead of a standard notice period of 12 months, he or the company was reportedly able to terminate the contract “at will” with no non-compete clause.
James Beazley, managing director of global leadership advisory firm 6 Group, said:
“A sliding share price, ambiguity over the future direction of the business and chaos in the boardroom are just some of the prices to be paid by getting it wrong. Shareholders in other companies will be looking at this ‘Sorrell effect’ and wondering if their investments are too closely aligned to the fate of single individuals rather than a corporate entity.
“Boardrooms at companies large and small have to put in place strong measures to de-risk the chance of senior figures leaving abruptly. It doesn’t matter whether the circumstances of an executive departure are planned or not. Shareholders are increasingly sensitive to this issue and I expect to see many boardrooms reviewing their succession planning, business continuity plan, crisis management and investor relations strategy as a result.”
Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist, he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.