California corporation
Exercise Scenario:
• You have just settled in to your first meeting as an independent director on the
Board of Directors of a five-year old California corporation – Golden Eagle
Health Diagnostics, Inc. (“Golden Eagle”) - that manufactures health care
diagnostic equipment.
• Notwithstanding its youth, Golden Eagle has quickly risen in its sector and has
several promising, high-tech diagnostic innovations in the pipeline.
• Golden Eagle is not publicly traded.
• Its capital structure is a function of a shareholder base of just under one
hundred shareholders, a few of whom are Silicon Valley health sciences
investors who collectively control about 40% of outstanding shares.
• The company owns several patents to highly innovative diagnostic products
under development that a number of Wall Street analysts have suggested could
provide tremendous returns in the future.
• The company is not highly leveraged, so it can still incur more debt, if deemed
appropriate.
• The Board has had some discussions about an initial public offering in perhaps
five years.
• Since its inception, Golden Eagle has been led by its founder and CEO.
• To her credit, the CEO has guided the shareholders toward the election of a
relatively independent board that highly respects the CEO without being her
“puppets.”
The Chairman of the Board begins the meeting with the following startling
announcement:
"As you know, we've talked on this board about the need to develop a
CEO succession plan. I've stated in the past my belief that the transition
from one CEO to another is a critical moment in a company’s history. A
smooth transition is essential to maintain the confidence of investors,
business partners, customers and employees, and provides the incoming
CEO with a solid platform from which to move the company forward. A
properly designed and executed succession plan is at the center of any
successful transition. As you also all know we have yet to develop such a
plan. Well, the time to do so has arrived.
I have the sad duty to report that our CEO has just informed me of her
decision to resign from the company for health reasons - her last day is in
six months. Somehow we need to formulate a succession plan, with
limited assistance from our CEO, identify what kind of qualities we should
be looking for in a new CEO, and do our best to find and select our next
CEO in, ideally, six months from now."
After much discussion, the board voted to task the Chair and yourself with the
following responsibility:
• Draft a four-page Executive Brief outlining a new “CEO Succession and
Selection Plan” for your company.
During the discussion, the Chair whispered into your ear that she expects you to come
up with an initial 4-page Executive Brief for her review, in MLA format, by 11:59 p.m.
Thursday, May 20 (via Prof. Cárdenas, of course).
In tackling your task consider the following:
1. Assume your company has no existing succession and selection plan, but that
it does have fairly recent strategic plan.
2. What should be the key components of the new CEO Succession and Selection
Plan and what should your company be aware of as it designs and executes
the plan?
3. Include in your Executive Brief your own suggestions concerning the specific
qualities that you believe Golden Eagle should look for in potential CEO
candidates.
4. Also include some discussion of how the board might go ab
Sample Solution
SIA had put emphasis on its human resource. At the beginning, the entry level is high with only diploma holder accepted and potential employee goes through extensive recruitment process. After appointment, the training of SIA’s cabin crew is 15weeks, twice longer than industrial standards. Employees then have six month probation with continuous report from supervisor and a confirmation rate of 75% with another 20% gets extension. These training are adjusting periodically to reflect customer’s expectation. The employees also engage in various voluntary community service, arts and cultural activities. The company also allows 3~ 4day to be spends on refresher course each year and encourages self directive learning giving them responsibility on their own development. The result of the training is obvious with a clear result of self esteem, motivated, empathise and independence employee [Heracleous and Wirtz. 2009].