You had one job – appointing the CEO

It seems like an obvious statement: “The appointment of the chief executive officer (CEO) is arguably the board’s most important function.” (Section 3.2, Four Pillars of Governance Best Practice)

How hard can it be?

Yet in the past week we have seen the board of a major company have its CEO, Bernard Looney, resign suddenly, having only been in the job since 2020.

While there remains some ambiguity about what exactly precipitated the resignation, BP has said an investigation is ongoing in light of Looney’s acknowledgement that he had not been “fully transparent” with the chair (and the board overall) about his relationships with company colleagues.

This follows an earlier investigation in May 2022 in which Looney disclosed “a small number of historical relationships with colleagues prior to becoming CEO.” The company’s code of conduct was not found to have been breached when this investigation was undertaken.

New allegations surfaced in the past month and, on top of that, there are suggestions that Looney’s relationships at the firm were well known before he took up the CEO role. This has lead to the BP board having to confront questions about its knowledge of this, as Looney had been a BP employee since he was 21 and held a number of senior executive roles at BP prior to his appointment as CEO.

What practical lessons should boards take from this?

There are three practical lessons that boards can take from this:

• Succession planning is important and a prospective pool of talent within and outside the company/ organisation is needed. Knowledge of this pool needs to be refreshed periodically to update it for changing circumstances and new information
• Board due diligence of CEO candidates is vital. This should include verification of information provided about the prospective CEO(s), a review of reputation information and the consideration of social media posts (among other things)
• Ongoing performance monitoring after appointment is also needed. With the best due diligence it is still possible for boards to miss key information or for new information to come to light, or to be clarified. CEO appointments are not “set and forget”.

With this in mind, directors and boards will find the practical guide, “10 Tips for Board: Chief Executive Officer (CEO) Recruitment” useful to help avoid (as far as possible) the difficulties the BP board has found itself in.