Succession plan

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Who takes over when the king leaves the board?

© SFIO CRACHO, magann, /stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

Who’s going to run things after you’re gone—or if something happens to you? That’s the question a succession plan is designed to answer, whether you’re a king or queen, a corporate board member, or the owner of a mom-and-pop store. Monarchies developed elaborate rules of succession because a disputed throne could bring instability or even war. Businesses face the same basic problem, but succession plans aren’t always made clear to investors, employees, or family members. Sometimes leaders simply don’t want to contemplate leaving. Other times, naming a successor means choosing among people who all think they deserve the job.

NVIDIA (NVDA) investors got a reminder in November 2026, when a scandal involving longtime CEO and cofounder Jensen Huang raised an uncomfortable question for a company with no clear successor: How do you replace someone who has been the name and face of the company for decades?

Succession planning is the process of deciding who will take over a leadership or ownership role and preparing for the transition. For a public company, that usually means replacing its CEO and other key executives. For a small business, it can be part of the owner’s estate plan, determining who will own the business, who will run it, and how the transfer will take place.

Kings and queens of times past understood the risks of not having a clear heir to the throne. Take England’s Wars of the Roses (1455–85), in which two branches of the royal family were at war for three decades. Another example is Spain’s Charles II, who died childless in 1700. He named Philip, duc d’Anjou, a grandson of France’s Louis XIV, as his heir. But competing claims to the Spanish throne—and fears that the succession would upset Europe’s balance of power—helped trigger the War of the Spanish Succession (1701–14), a conflict involving Europe’s major powers.

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Actor Brian Cox portraying Logan Roy in the television series Succession (2018–23).

© Succession/HBO Entertainment

Centuries later, HBO’s Succession put the same succession issue into a fictional corporate boardroom. The satirical drama follows a media mogul who deliberately keeps his choice of successor vague while constantly changing his mind. As a result, his adult children spend four seasons fighting one another to claim their father’s proverbial throne.

Dynasties, whether royal or corporate, transition best when the succession plan is smooth and clear.

In a public company, CEO succession is ultimately the responsibility of the board of directors and an important part of corporate governance. The sitting CEO may help identify and develop potential successors, but the board selects the next chief executive. 

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Warren Buffett and President Barack Obama during a White House meeting in 2011.

Pete Souza—Official White House Photo

An orderly succession is one in which both the CEO and board agree on who comes next. By the mid-2020s, Berkshire Hathaway (BRK-A/BRK-B) faced a particularly difficult version of the problem: Legendary investor Warren Buffett had led the company for six decades, and his name had become nearly synonymous with Berkshire itself. The board and Buffett selected Greg Abel as his replacement, and the company signaled the transition more than four years before Abel took over as CEO in January 2026.

Apple (AAPL) has gone through two planned handoffs in the 21st century. When Steve Jobs stepped away for medical reasons in 2009 and again in 2011, chief operating officer Tim Cook took responsibility for day-to-day operations. When Jobs resigned as CEO in August 2011, he recommended that Apple execute its succession plan and name Cook CEO. Fifteen years later, after Apple had become the world’s most valuable public company and surpassed $4 trillion in market capitalization under Cook, the company announced that John Ternus would succeed him, more than four months before Ternus took over in September 2026.

In both the Berkshire and Apple transitions, investors had time to size up the successor, reducing the potential shock or surprise that can come with a sudden transfer of power.

What happens when a CEO suddenly dies or has to step down immediately? In 2004, McDonald’s Corporation (MCD) experienced this twice within a year. McDonald’s CEO Jim Cantalupo died of a heart attack in April 2004, and within hours, the board named Charlie Bell as his replacement. A few weeks later, Bell was diagnosed with cancer and was succeeded by Jim Skinner by the end of the year. Despite the two sudden transitions, the company weathered them relatively smoothly, thanks in part to the company’s emergency succession plans.

Emergency succession plans typically identify interim leadership, establish who has authority to make key decisions, and lay out how the company will communicate the transition to employees, customers, and investors.

Key person risk, sometimes called key employee risk and historically known as key man risk, arises when a company is so dependent on one leader or employee that losing that person could change the company’s prospects.

For example, the rise of artificial intelligence turned NVIDIA’s chips into some of the most sought-after technology in the world and helped the chipmaker become, at one point, the world’s most valuable company. Cofounder and longtime CEO Jensen Huang became closely identified with the company’s meteoric rise, with no clear successor waiting in the wings. The risk became real in November 2026, when a scandal involving Huang led to his sudden resignation and left NVIDIA scrambling to find its next leader.

A key person can be anyone whose death, disability, or departure would create a quantifiable financial risk to the company, whether through lost revenue, disrupted operations, or another measurable loss. Companies can mitigate key person risk by developing other members of the senior leadership team and buying key person insurance—that is, life insurance and/or disability policies taken out by a company on a key executive or employee.

As an investor, you shouldn’t have to wait for a crisis to assess a company’s succession risk. Start with the company’s annual report, known as Form 10-K, which publicly traded companies file with the Securities and Exchange Commission (SEC). Its risk disclosures may tell you whether the company considers itself dependent on its CEO or other key employees. Corporate guidelines can describe how the board would oversee a transition, while the management team itself can offer clues, such as a second-in-command or public-facing executive who appears capable of taking charge when a key leader makes an exit.

None of these guarantees a smooth transition, but together they can give you a better idea of how prepared the company is for one.

For many small business owners, the business itself is their biggest asset, and there may not be a board of directors to oversee succession. That’s why the succession plan belongs in the estate plan. And if you own such a business or are involved in one, there are a few questions that need to be answered.

Owning and running a business can be two separate things. A couple may own a business, but a daughter or son may be running it. A pair of siblings may have inherited a business from mom and dad, but only one actively manages it. Who will own the business, who will run it, and how each person will be compensated should be settled on paper long before any of it becomes a matter of dispute. Otherwise, an heir who takes no part in the business could end up with a substantial ownership stake—and potentially the ability to sell it to someone outside the family.

A buy-sell agreement is a legally binding contract between business co-owners that spells out what happens to an owner’s share after a triggering event, such as death, disability, retirement, or departure from the business. Without one, a partner’s heir could inherit an ownership stake in the business. A buy-sell agreement can instead require or allow the remaining owners or the business itself to purchase those shares.

In order for a buy-sell agreement to work, partners must agree on two details: valuation and funding.

In a cross-purchase agreement, the owners buy policies on one another. If an owner dies or becomes disabled, the remaining owners receive the insurance proceeds to help fund the purchase of that owner’s share. In an entity-purchase agreement, the business owns the policies and uses the proceeds to buy the departing owner’s interest.

The two structures can have different tax consequences, so it’s best to consult an attorney and/or tax advisor if you’re considering a buy-sell agreement as part of a succession plan.

An owner can keep the business in the family, but that works best when a family member is interested in and capable of running it. In other cases, an employee may choose to buy the business, either in a lump sum or structured purchase. You may even consider an employee stock ownership plan (ESOP), a tax-advantaged retirement plan that gives employees a degree of ownership in the company. 

Selling the business to an outside buyer is another succession option. That buyer could be another local business, an individual entrepreneur, or a private equity firm. For some owners, selling the business is how they fund retirement or leave something behind for their heirs.

A solid succession plan consists of naming a successor, establishing the conditions for transition, putting it in writing, and telling the people who need to know.

For a small or family-owned business, that may include family members, partners, key employees, customers, and especially lenders. Lenders matter because some loans have change-of-control clauses that can kick in once ownership changes hands. Not everyone needs to know every detail, but the people affected by the transition should know what they need to know.

What you don’t want is to have a company’s succession revealed for the first time at the reading of the will. From royal dynasties to family businesses, the worst time to explain—or execute—a succession plan is after the succession has already begun.