Succession Planning Failures

The recent turbulence at Paramount Global has turned a spotlight on one of the most critical yet neglected aspects of corporate governance: succession planning. When leadership transitions are mishandled, the fallout goes beyond boardroom gossip. It destroys shareholder value, alienates talent, and leaves companies vulnerable to hostile takeovers. The media industry in particular has provided a masterclass in how not to hand over the keys.

The Paramount Parable: A Case Study in Chaos

The situation at Paramount Global throughout 2023 and 2024 serves as a stark warning for businesses of all sizes. The company, which owns CBS, MTV, and Nickelodeon, found itself in a state of paralysis due to a complex web of family control and indecision.

The Problem of the “Office of the CEO”

In April 2024, Bob Bakish was ousted as CEO of Paramount Global. Rather than naming a clear successor, the board created an “Office of the CEO” comprising three division heads:

• George Cheeks: President and CEO of CBS.
• Chris McCarthy: President and CEO of Showtime/MTV Entertainment Studios.
• Brian Robbins: President and CEO of Paramount Pictures and Nickelodeon.

This “management by committee” approach is rarely effective in the long run. It creates confusion regarding final decision-making authority and often signals to the market that the board was unprepared for the transition. Investors responded with skepticism, and the stock price remained volatile as the trio attempted to present a unified strategy during earnings calls.

The Family Control Factor

The root of the complexity at Paramount lies in its dual-class share structure. While public shareholders own the majority of the equity, the voting power is controlled by National Amusements Inc. (NAI). NAI is controlled by Shari Redstone, the daughter of the late media mogul Sumner Redstone.

This structure means that succession planning is not just about finding the best executive. It is about satisfying the specific desires of the controlling family. During the spring of 2024, Shari Redstone engaged in exclusive merger talks with Skydance Media (led by David Ellison), then abruptly called them off, only to restart negotiations later. This unpredictability paralyzed the company, making it difficult for the interim leadership to execute long-term strategies.

Disney's Boomerang CEO

Paramount is not alone. The Walt Disney Company is currently living through its own succession nightmare. This saga highlights the danger of choosing a successor who does not align with the company’s culture or creative soul.

The Iger-Chapek-Iger Loop

Bob Iger, widely considered one of the most successful CEOs in media history, handpicked Bob Chapek as his successor in February 2020. The transition was abrupt and occurred right at the onset of the COVID-19 pandemic.

Chapek lasted less than three years. His tenure was marked by:

1. Cultural Misalignment: Chapek reorganized the company in a way that stripped power from creative executives, leading to internal revolt.
2. Public Relations Missteps: His handling of the “Don’t Say Gay” legislation in Florida alienated both employees and politicians.
3. Financial Struggles: While streaming numbers grew, losses at Disney+ mounted.

In November 2022, the board fired Chapek and brought Iger back. While this stabilized the stock initially, it kicked the can down the road. Iger’s contract has been extended through 2026, but the company is essentially back to square one in finding a replacement. To address this, Disney appointed James Gorman, the former CEO of Morgan Stanley, to lead its succession planning committee in 2024, hoping to bring rigorous banking-style discipline to the process.

The High Cost of Poor Planning

These high-profile failures illustrate specific financial and operational risks that apply to any business.

Brain Drain and Talent Flight

When leadership is uncertain, top talent leaves. During the Paramount negotiations in 2024, reports surfaced that senior executives were looking for exits because they did not know who their boss would be in six months. Stability is a key retention tool. If high-performers feel the ship is rudderless, they will jump to competitors like Netflix or Amazon, where the leadership structure appears more stable.

Strategic Paralysis

Major strategic decisions get put on hold during botched transitions. At Paramount, the “Office of the CEO” had to outline a strategic plan involving $500 million in cost cuts and potential asset sales. However, executing these sales is difficult when potential buyers know the company is simultaneously trying to sell itself to Skydance or Apollo Global Management. The company effectively froze in place while the market moved forward.

Erosion of Shareholder Trust

Institutional investors hate uncertainty. The lack of a clear succession plan is often viewed as a governance failure. When Disney brought Iger back, it was an admission that their vetting process for Chapek was flawed. When Paramount installed a triumvirate of CEOs, it signaled they had no backup plan for Bob Bakish. This erodes the “trust premium” that usually supports a stock price.

How to Fix the Succession Pipeline

The failures of media giants suggest three concrete steps for better governance.

1. Start Years in Advance

Succession planning should not begin when a CEO announces retirement. It should be an ongoing process. Boards need to identify internal candidates 3 to 5 years out and rotate them through different divisions. Disney failed to do this effectively with Chapek, who had run Parks and Resorts but lacked deep experience in the creative studio side of the business.

2. Move Beyond the “Great Man” Theory

Founders and long-time CEOs like Sumner Redstone, Rupert Murdoch, and Bob Iger often make themselves indispensable. This is a liability. Companies must build systems that function independently of the charismatic leader. The board’s job is to ensure the institution is greater than the individual.

3. Transparent Criteria

The board must agree on the profile of the next leader before they look at specific names. Does the company need a wartime general to cut costs (like David Zaslav at Warner Bros. Discovery) or a peacemaker to nurture creative talent? Paramount’s vacillation between selling the company and independent growth suggested they did not know which type of leader they actually needed.

Frequently Asked Questions

What is the main cause of succession failure in family-controlled companies? The primary cause is often the conflict between family dynamics and fiduciary duty. In companies like Paramount (Redstone family) or News Corp (Murdoch family), the controlling shareholders may prioritize family legacy or control over the most qualified external candidate.

Why do companies appoint interim CEOs? Interim CEOs are appointed to provide immediate stability when a leader departs unexpectedly. However, keeping an interim leader (or a committee) in place for too long creates uncertainty. It usually indicates the board does not have a permanent candidate ready.

How does a botched succession affect stock prices? Markets dislike uncertainty. If investors cannot see a clear path forward or do not trust the new leader, they sell. For example, Disney’s stock hit multi-year lows even after Iger returned, as investors realized the underlying issues with succession and strategy remained unsolved.

What is a dual-class share structure? This is a system where one class of shares has more voting power than another. At Paramount, Class A shares (mostly owned by the Redstone family) have voting power, while Class B shares (owned by the public) do not. This allows a minority equity holder to control the board and succession decisions.