A Corporate Board Member/Farient Advisors report on how compensation committees are moving closer to succession planning—and what boards need to know before pay becomes the emergency lever.
74 percent of directors say their compensation committee’s involvement in succession-related issues has increased over the past two years.
Only 33 percent of directors say their board uses compensation “to a great extent” to support succession strategy and retention of internal candidates.
Roughly one third of directors say compensation is typically considered when a transition becomes likely.
Only 18 percent say their board’s succession planning fully extends beyond the CEO to include at least two levels down.
In June 2026, Corporate Board Member surveyed 131 public company directors about the role of compensation in CEO and C-Suite succession planning, candidate retention and leadership readiness. The anonymized data was then analyzed by CBM’s research arm and the team at Farient Advisors.
This report is designed to help directors translate the research into boardroom action: where we are today, what boards and their committees can do to strengthen their process, what to ask, what data to review and how to choose the right intervention.
Succession planning is not just a CEO replacement exercise. Leadership movement has widespread consequences across the organization. With today’s shorter tenures, the wrong move can destabilize a culture—and a strategic direction.
It’s also becoming a common event: 41 percent of directors surveyed reported a CEO succession event in the past two years, 42 percent reported CFO succession, and 63 percent reported other C-Suite succession. Only 13 percent said their company experienced none of those events.
At the same time, many boards still have limited visibility below the top role. Only 18 percent of directors said their board’s succession planning fully extends beyond the CEO to include at least two levels down.
*Respondents were asked to select all that apply.
That gap matters because C-Suite succession can create more than a single vacancy. It can affect the executives who were passed over, the leaders who are asked to take on expanded roles, the candidates whose readiness is still uncertain and the broader team that must stay engaged through the transition.
Boards should evaluate talent as an enterprise leadership system, not a replacement chart. The focus should be continuity of leadership capability across the organization, including the executives who may be passed over, those asked to take on expanded roles and the broader team that must remain engaged through transition.
Boards should pressure-test how far their succession process really reaches. A CEO succession plan that does not show the next layers of leadership may leave the board without enough information to understand who is ready, who is vulnerable and which departures could create operational risk.
Directors should ask management:
Directors surveyed reported using a range of compensation tools to support succession candidates and high-potential leaders. The most common is above-median target pay positioning, cited by 58 percent of directors.
Forty-three percent also said they use special retention awards, 41 percent use special incentives tied to individual performance or leadership development, and 22 percent use larger or more frequent equity grants. Twelve percent said they do not use compensation explicitly for this purpose.
Compensation is one tool among many. Development opportunities, expanded responsibilities, board exposure, career-path clarity and succession planning often have greater impact when the issue is long-term readiness rather than immediate retention. The best retention strategy is often a compelling future, not simply a larger paycheck.
Organizations rarely solve succession challenges when a role becomes vacant. The strongest leadership pipelines are built years in advance through intentional development, increased exposure and clear pathways to future opportunity. Effective boards match the intervention to the challenge, recognizing that retention and succession planning are part of the same long-term talent strategy.
*Respondents were asked to select all that apply.
The question for boards is not simply which compensation tools are available, but what problem each tool is meant to solve.
A useful board question: Are we matching the intervention to the talent challenge—or simply rewarding people we are afraid to lose?
Compensation can support succession planning in many ways, but directors say boards are no longer seeing it as a prominent retention lever. Instead, the data finds boards more often pair pay with development, expanded responsibilities and a clearer future path rather than using it as a stand-alone answer.
Among directors whose companies took action to retain internal candidates who were passed over for a leadership role, 63 percent said the company provided enhanced development opportunities for a future succession path, and 49 percent assigned the individual to a new or expanded role. Forty-five percent provided a special retention award, and 24 percent increased ongoing compensation.
Compensation can support succession planning, but it cannot substitute for leadership development, readiness assessment and long-term talent planning. When boards rely primarily on retention grants, they may be treating symptoms rather than causes. Pay should accelerate a talent strategy, not become a substitute for one.
*Respondents were asked to select all that apply.
Before approving a retention award, directors should define the problem they are trying to solve. If the issue is readiness, the better answer may be development. If the issue is lack of visibility, the better answer may be more board exposure. If the issue is uncertainty about future fit, the better answer may be an expanded role or a more candid conversation.
A useful test for boards: Would this pay action solve the underlying succession risk—or simply delay a decision the board still has to make?
Counteroffers are not a default retention strategy, the survey found. When senior executives receive outside offers, 45 percent of directors said their company sometimes makes counteroffers, but 42 percent said they rarely or never do.
Only 6 percent said counteroffers are used often or always in those situations.
By the time an executive presents an external offer, boards should already understand that individual’s criticality, retention risk, future potential and the company’s willingness to act. A counteroffer should rarely be a surprise. It should confirm what the board already knew, not reveal a risk the board had not anticipated.
A counteroffer decision should not begin with the outside offer. Boards should already know which executives are critical, what the company would lose if they left, what holding power exists and whether the board would be willing to pay more before a crisis.
A useful test: If the board would pay more after the executive gives notice, why is that risk not being addressed now?
When making pay decisions for executives, directors surveyed put the greatest weight on performance, readiness and role criticality: 91 percent rated executive performance as very important, while 84 percent rated the executive’s experience and readiness for the role as very important, and 84 percent rated the criticality of the role to company strategy as very important.
Succession potential and retention risk are also significant, with 54 percent rating them very important.
Shareholder or proxy advisor reaction is less likely to be treated as a primary driver: only 9 percent rated it very important, while 61 percent rated it somewhat important.
Boards need a repeatable framework for balancing performance, readiness, role criticality, succession potential, retention risk and internal equity. The objective is not simply informed judgment, but disciplined decision-making that can be explained before the pay action is taken. Strong governance requires a decision process, not only a point of view.
The data suggests boards are not making succession-related pay decisions on retention risk alone. Performance and role criticality still dominate. That is healthy—but only if boards also have a clear view of readiness, succession potential and the potential cost of departure.
Boards should document the rationale for any succession-related pay action across six dimensions:
| Dimension | Question for directors |
|---|---|
| Performance | Has this executive delivered results that justify the pay action, independent of retention concerns? |
| Readiness | Is this executive ready now, ready soon or still missing experiences needed for the next role? |
| Role criticality | Would losing this executive materially disrupt strategy, operations, transformation or value creation? |
| Succession potential | Is this person part of a credible future leadership path, or are we paying to retain someone without a clear next step? |
| Retention risk | What evidence suggests this executive is likely to leave, and what would actually cause them to stay? |
| Internal equity / precedent risk | How will this action affect pay fairness, future negotiations and expectations among other leaders? |
A succession decision can create risks beyond the role being filled. A passed-over candidate may leave, a critical operator may be destabilized, an internal-equity issue may surface, or the board may discover too late that existing pay structures do not have enough holding power.
The board’s task is to connect those risks before the transition occurs, not after a key executive has already begun considering alternatives.
The counteroffer data suggests boards are weighing the immediate business risk of executive departure more than the succession implications. Seventy percent of directors say role criticality drives counteroffer decisions, followed by executive performance at 63 percent and CEO recommendation at 61 percent.
Succession status is a factor for only 39 percent, indicating that even when a senior executive is at risk of leaving, the person’s place in the succession pipeline may not be fully part of the board’s calculus.
Every succession decision creates second- and third-order consequences. Candidates may leave, teams may be disrupted, compensation pressures may emerge and development needs may shift. Boards should anticipate these ripple effects before transitions occur. The true cost of succession often lies in what happens after the decision is made.
*Respondents were asked to select all that apply.
Boards have a duty to review vulnerability risk at the executive level, not only at the role level. The question is not simply, “Who could replace this person?” It is also, “Who might leave because of this decision, and what would that cost?”
When assessing candidates and gauging retention risk within any of those paths, directors should consider:
Directors’ improvement priorities suggest that many boards want more actionable information, not simply more reports:
Boards need data that supports decisions around readiness, vulnerability, holding power, replacement depth and transition cost. The goal is actionable insight, not more reporting.
| Data / information type | Currently receive | Would like to receive |
|---|---|---|
| Market pay data for the next level up executives who could move into higher roles | 95% | 5% |
| Identification of roles/ people who are most critical to the future of the company | 93% | 7% |
| Market practices for retaining succession candidates | 80% | 20% |
| Data on the value of unvested compensation or “holding power” | 91% | 9% |
| Market data on retention risk for succession candidates, including what happens when an internal candidate is not selected | 81% | 19% |
| Shareholder / proxy advisor perspectives on succession-related pay actions | 84% | 16% |
Boards should ask for data that supports decisions, not just dashboards. The most useful information should help directors answer:
Directors are broadly confident in their use of compensation in succession planning: 52 percent said their company uses compensation very effectively to support talent retention and leadership readiness, and 42 percent said somewhat effectively.
But confidence alone is not the end point. The next step is converting board judgment into a repeatable process for evaluating readiness, vulnerability, holding power, replacement depth and transition cost.
Most directors express confidence in their succession processes. The next step is creating objective support for those judgments through data, analytics and disciplined assessment. Evidence creates confidence that can withstand scrutiny.
Just like the goal of retention is not to pay more people to stay, the next stage of succession oversight is not simply better pay data or a deeper succession chart. Rather, a board’s objective should be to ensure an integrated view of readiness, vulnerability, holding power, replacement depth and transition cost across key roles in the organization.
Boards should leave the process with a clear answer to four questions:
Taken together, the data suggests that succession-related compensation decisions sit at the intersection of several board processes: compensation design, succession planning, leadership development, retention-risk analysis and emergency transition planning.
The issue is not simply whether the board has a succession plan, but whether it has a repeatable way to decide when pay, development, role design or a different succession strategy is the right answer.
Effective succession oversight starts with disciplined inquiry. Directors should focus on organizational resilience, leadership depth, retention risk and development readiness. The quality of succession oversight is reflected in the quality of questions being asked.
For the compensation committee
For the nom/gov committee
For the full board
Corporate Board Member partnered with Farient Advisors to develop a survey about the role of compensation in CEO and C-Suite succession planning, candidate retention and leadership readiness at large public companies. Then, Corporate Board Member collected the perspectives of 131 board members, offering a diverse viewpoint across a range of industries and committee assignments.
The demographic charts below provide context on the directors represented in the research and the types of companies they help oversee. Responses were anonymized, and the aggregated findings were analyzed by CBM’s research arm and Farient Advisors to identify broader trends in board practice.
| Executive director | 6% |
| Outside director | 50% |
| Lead director | 12% |
| Board chair | 20% |
| Committee chair | 36% |
| Audit/Risk | 61% |
| Compensation | 61% |
| Nom/Gov | 60% |
| Other | 24% |
| Under $1B | 5% |
| $1B–$2B | 15% |
| $2B–$5B | 25% |
| $5B–$10B | 16% |
| More than $10B | 39% |
| Energy | 9% |
| Materials | 7% |
| Industrials | 19% |
| Consumer discretionary | 16% |
| Consumer staples | 7% |
| Healthcare | 8% |
| Financial services | 19% |
| Information technology | 9% |
| Communication services | 2% |
| Utilities | 2% |
| Real estate / REIT | 3% |
Corporate Board Member, a division of Chief Executive Group, has been the market leader in board education for 20 years. The quarterly publication provides public company board members, CEOs, general counsel and corporate secretaries decision-making tools to address the wide range of corporate governance, risk oversight and shareholder engagement issues facing their boards. Corporate Board Member further extends its thought leadership through online resources, webinars, timely research, conferences and peer-driven roundtables. The company maintains the most comprehensive database of directors and officers of publicly traded companies listed with NYSE, NYSE Amex and Nasdaq. Learn more at boardmember.com.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
Farient Advisors LLC, a GECN Group Company, is an independent premier executive compensation, performance, and corporate governance consultancy. Farient provides a full array of services linking business and talent strategy to compensation through a tailored, analytically rigorous, and collaborative approach. Farient has locations in Los Angeles, Newport Beach, New York, Louisville and London and works with clients globally through its partnership in the Global Governance and Executive Compensation (GECN) Group. Farient is a certified diverse company and is recognized by the Women’s Business Enterprise National Council.