Tag: Board Governance

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When the CEO Has to Go: What Forced Departures Tell Boards and CCOs About Governance

CEO succession is usually discussed as a planning exercise. Boards identify potential successors, develop internal talent, periodically review the succession plan, and prepare for the orderly transition that eventually comes with retirement or another planned departure.

But succession does not always wait for the planning calendar. In an article in the Harvard Law School forum on Corporate Governance, titled Forced CEO Departures, the authors reported on a new study by The Conference Board, developed with ESGAUGE and other collaborators, that examined forced CEO departures among Russell 3000 and S&P 500 companies from 2024 through August 2026. Roughly one in seven CEO succession cases were classified as forced in both 2024 and 2025. In the Russell 3000, 49 forced departures occurred in 2024 and 55 in 2025. The S&P 500 recorded seven and 10, respectively. The forced departure numbers are interesting. The governance implications are more important.

This research on forced CEO departures reminds boards to prepare for unscheduled CEO transitions. For Chief Compliance Officers, the findings raise an equally important question: what information should the compliance function be providing to the board before a leadership problem becomes a leadership crisis?

Forced CEO departures demonstrate that succession planning, executive accountability, corporate performance, investor confidence, culture, and risk oversight cannot be separated into different governance boxes. They ultimately meet in the boardroom. For a Chief Compliance Officer (CCO), they also demonstrate why compliance must function as an organizational sensor capable of identifying patterns that individual incidents may not reveal.

Forced Succession Is a Governance Risk

The report defines a forced departure broadly enough to capture the realities of corporate governance. A departure is forced when evidence indicates that the board, activist investors, an investigation, performance concerns, misconduct, or strategic disagreement materially influenced the timing or terms of the CEO’s exit. Importantly, a departure publicly described as a resignation or retirement may still have been board-driven. That distinction matters.

Boards should not think about CEO succession solely as identifying the person who eventually replaces a successful CEO. Succession planning must also contemplate what happens when the board concludes that the current CEO can no longer lead the organization effectively.

The report’s 2024 and 2025 data make that point. Forced departures represented 14.7 percent and 14.8 percent of Russell 3000 succession cases, respectively. Among the S&P 500, the corresponding figures were 14.3 percent and 15.2 percent. Those figures should change the boardroom conversation.

The question is not simply, “Who succeeds the CEO someday?” It is also, “What happens if we need a new CEO next Monday?”

Performance Is Becoming a Governance Question

Perhaps the most significant finding concerns why CEOs were forced out. Underperformance accounted for 37 percent of Russell 3000 forced departures across the period studied. It increased from 31 percent in 2024 to 44 percent in 2025 and remained the largest category through August 2026. Underperformance, activist pressure, and termination without cause collectively accounted for 70 percent of forced departures during the full period.

For directors, that creates a difficult governance question. When does poor performance become a leadership problem? A single disappointing quarter should not automatically become a referendum on the CEO. External economic conditions, industry disruption, commodity prices, interest rates, geopolitical events, and other factors can affect performance.

Yet boards cannot allow those explanations to become permanent excuses. The report recommends establishing in advance the conditions that trigger a deeper assessment of CEO effectiveness. That assessment should extend beyond financial results to strategic milestones, competitive position, organizational capability, and how the CEO responds to setbacks. That is an important governance discipline. Agreeing on the indicators before the crisis reduces the danger of redefining success after performance deteriorates.

The CCO Has a Different Window Into CEO Effectiveness

Here the compliance function enters the discussion. The report is primarily about CEO succession and board governance. It does not assign the CCO responsibility for evaluating CEO performance. Nor should it. But compliance often sees organizational information through a different lens than Finance, Strategy, HR, or Investor Relations.

A CCO may see whether employees are becoming reluctant to speak up. Compliance may identify retaliation concerns involving senior management. Investigations may reveal recurring management override. Hotline data may show patterns concentrated around particular executives or business units. Third-party reviews may expose pressure to circumvent controls. Internal investigations may demonstrate that employees believe commercial performance is valued more highly than ethical conduct.

One event may mean little. Patterns can mean much more. This is why an effective CCO should not simply report hotline statistics to the board. The CCO should help directors understand what the information may be saying about organizational culture, controls, accountability, and risk.

The question becomes: What does the board need to know to discharge its oversight responsibilities?

That is a very different question from: What compliance information did management ask us to provide?

CEO Accountability and the Control Environment

CCOs should also pay attention to forced CEO departures. The CEO sits at the top of the organization’s control environment. The CEO’s conduct affects incentives, resources, accountability, escalation, management behavior, and whether employees believe controls are genuine requirements or obstacles to business performance.

That means directors assessing leadership should consider more than revenue growth and shareholder returns. They should understand whether management responds appropriately when controls identify problems. Some key questions a CCO might ask include:

Does the CEO support investigations even when they involve high-performing executives? Does management remediate identified weaknesses? Are compliance personnel adequately resourced and empowered? Are executives held accountable consistently? Does information reach the board without being filtered into insignificance?

These questions connect CEO oversight to compliance program effectiveness. They also reinforce why direct access between the CCO and the board or an appropriate board committee matters. The value of that relationship becomes clearest when the information the board needs is information senior management would prefer not to discuss.

Activists May Ask the Questions Boards Should Already Be Asking

The report contains another significant finding.

Among S&P 500 forced departures, activist pressure accounted for five of 10 departures in 2025. Across 2024 through August 2026, activists were associated with eight of 19 forced departures, or 42 percent. The report notes that activist campaigns frequently focus on matters already within the board’s remit, including performance, strategy, capital allocation, portfolio structure, governance, and confidence in management. Forced CEO Departures

There is a governance lesson here. A board should not need an activist investor to tell it which difficult questions to ask. Directors should periodically examine the company through an independent investor lens. Where is performance lagging? Which strategic assumptions have not proved correct? Where has capital allocation failed to produce expected results? What would a sophisticated outsider identify as the company’s vulnerabilities?

For the CCO, there is a parallel exercise. What would a regulator, whistleblower, investigative journalist, plaintiff’s lawyer, or enforcement authority see if they examined the same facts? These perspectives are not substitutes for the board’s business judgment. They are tools for challenging assumptions. Effective oversight requires directors to seek disconfirming information, not just information that supports management’s existing narrative.

Succession Planning Needs a Break-Glass Option

The report recommends that boards maintain an accelerated succession plan alongside traditional succession planning. That distinction is critical. A normal succession plan asks who might become CEO in several years. An accelerated plan asks who takes control tomorrow morning.

The board should know who can provide immediate continuity, which internal executives could become permanent successors, when an external search would be required, and how to retain key executives during the transition. The plan should also address interim authority, compensation, severance arrangements, and employee and investor communications. Compliance should be part of that contingency architecture.

Questions might include: If the departure involves misconduct or an investigation, who controls the investigation after the CEO leaves? Who has authority over document preservation? Who makes disclosure decisions? Who communicates with regulators? What happens if other senior executives are implicated? Does the CCO continue reporting through the same management structure, or should reporting temporarily move directly to the board?

The report itself does not address these questions, but they follow directly from the compliance risks created by an unexpected leadership transition. The worst time to design these protocols is during the crisis.

The Board and CCO Need an Early-Warning System

The larger lesson from the forced-departure data is not that boards should terminate CEOs more quickly. It is that boards should become better prepared to recognize and respond to deteriorating conditions.

The report found no consistent company-size profile for forced turnover. Elevated rates appeared across the revenue spectrum. The more meaningful indicators were company-specific factors, including persistent underperformance, strategic misalignment, and investor scrutiny. Forced CEO Departures

That suggests boards need an integrated early-warning system.

  • Financial performance is one signal.
  • Strategic execution is another.
  • Investor sentiment is another.
  • Compliance and culture data should be another.

The CCO can contribute by identifying trends in allegations, investigations, retaliation, control overrides, disciplinary decisions, third-party exceptions, and other indicators that may reveal stress inside the organization. The board then has the responsibility to connect the dots.

Questions for the Board and CCO

Boards should periodically ask whether they have defined the conditions that would trigger a reassessment of CEO effectiveness; whether they have a genuine emergency succession plan rather than simply a long-term succession plan; whether directors receive information about culture, investigations, controls, and retaliation without inappropriate management filtering; and whether they understand recurring concerns raised by shareholders, employees, auditors, compliance, and other stakeholders.

CCOs should ask different questions. Are we giving the board data or insight? Are recurring issues being presented as isolated events? Are senior executives subject to the same accountability standards as everyone else? Does the CCO have a practical route to the board when senior management itself presents the risk? If the CEO suddenly departed tomorrow because of an investigation, could Compliance continue operating without interruption?

Those can be uncomfortable questions. Yet, they are also precisely the questions effective governance requires. Forced CEO departures are not simply stories about executives losing their jobs. They stress-test the governance system around those executives.

The board’s responsibility is to ensure it can recognize when leadership circumstances have materially changed and act deliberately, not reactively. The CCO’s responsibility is different but complementary: ensure that compliance, culture, control, and investigation information that can inform that judgment reaches the board clearly and promptly.

A board should never discover during a CEO crisis that the warning signs were there all along. A better governance model identifies those signals early, understands what they mean, maintains credible succession alternatives, and establishes decision processes before they are needed. That is not planning for failure. It is planning for effective oversight.

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AI Governance and Fiduciary Duty: Board Oversight of AI As Core Governance

There was a time when boards could treat AI as a management-side innovation issue, something for the technology team, the innovation committee, or perhaps an occasional strategy offsite. That time is ending. No longer. For every compliance professional, AI stops being a technology story and becomes a governance story. And once it becomes a governance story, boards need to pay attention through the lens they know best: fiduciary duty.

The issue is not whether every director needs to become an engineer. They do not. The issue is whether the board is exercising appropriate oversight over a capability that can materially affect legal exposure, operational resilience, internal controls, reputation, and enterprise value. Under that lens, ignoring AI oversight begins to look less like prudence and more like a governance gap.

The Board Question Is No Longer “Do We Use AI?”

Too many board discussions still start in the wrong place. A director asks, “Are we using AI?” Management says yes, in a handful of pilots. Another director asks whether there is a policy. Legal says yes, one is being drafted. Everyone nods, reassured that the matter is under control. That is not oversight. That is atmospherics.

The real board questions are different. Where is AI being used? What decisions does it influence? What data does it rely on? Who owns it? How is risk assessed? What controls are in place? What gets reported upward when something changes or goes wrong?

COSO’s GenAI guidance is quite direct on this point. It states that the board of directors must have visibility into GenAI use and associated risks, including regular reporting on adoption, key risk indicators, incidents, and material changes to high-impact use cases. It also says oversight bodies should have the capacity to challenge assumptions, request independent validation, and direct corrective action.

Fiduciary Duty Means Oversight, Not Technical Mastery

The fiduciary duty standard is more practical and more familiar. Directors are expected to exercise informed oversight over material risk. If AI is shaping material processes, material decisions, or material exposures, then the board should ask how management governs it and what evidence supports that confidence.

This is where compliance can be a true translator. We understand how to connect abstract governance expectations to operational proof. We know the difference between having a policy and having a control. We know that a dashboard without escalation is theater. We know that a pilot without documentation is an anecdote. And we know that “the business owns it” is not enough unless ownership is defined, trained, monitored, and accountable.

COSO again gives a helpful framework. It emphasizes clear ownership of each GenAI tool, platform, or capability, with defined authority, escalation paths, and documented scope of use. It further stresses that assigning ownership without the capability to deliver invites failure, and that accountability should be tied not only to adoption but also to accuracy, safety, compliance, and adherence to controls. Boards do not need to run AI. But they do need assurance that someone competent owns it and that the ownership model is real.

Why AI Oversight Is Different from Ordinary IT Oversight

Some directors may be tempted to ask whether this is simply another version of cybersecurity or of oversight for digital transformation. There is overlap, certainly, but AI presents a different governance profile. COSO notes several characteristics that distinguish GenAI. It is dynamic: models, prompts, and retrieval data can change frequently, requiring continuous risk assessment, change control, and monitoring. It is easily scalable, meaning it can amplify errors and bias as readily as it can amplify efficiency. It has a low barrier to entry, which increases the risk of shadow AI and ungoverned adoption. And critically, it can be confidently wrong.

That last point is especially important for boards. A broken machine usually signals that it is broken. AI often does the opposite. It produces polished, persuasive, and highly plausible output even when it is materially mistaken. That means traditional management confidence can be a weak proxy for actual reliability. Boards, therefore, need a different kind of assurance model, one that asks not only whether the system is in place, but whether the organization can validate outputs, explain limitations, monitor drift, and intervene when use cases expand beyond what was originally approved.

The Governance Gap Boards Must Avoid

Here is where the fiduciary-duty lens becomes especially useful. The governance failure in the AI era is unlikely to be that a board has never heard the term “AI.” Every board in America has heard it. The failure is more likely to be subtler and therefore more dangerous: the board heard about AI in broad strategic terms but never built a repeatable oversight mechanism around it.

That is the governance gap.

It shows up when management reports adoption but not risk classification.

It shows up when directors hear about productivity gains but not control failures.

It shows up when there is an AI policy but no inventory of use cases.

It shows up when there is enthusiasm about innovation but no discussion of third-party dependencies, data quality, escalation paths, or human review.

It shows up when incidents are handled ad hoc rather than through a defined reporting structure.

COSO warns that rapid iteration can outpace existing processes, and that prompts, thresholds, and retrieval connectors are critical configuration elements that require the same rigor as other controlled system settings. It also highlights third-party and vendor risk, noting that outsourced GenAI capabilities can limit visibility into training data, model updates, data handling, and underlying controls.

In other words, the board should not assume AI risk is contained simply because a vendor is involved or because the tool sits inside a familiar enterprise platform. That should sharpen the oversight question.

What Good Board Oversight Looks Like

The good news is that effective AI oversight is not mystical. It looks a great deal like good oversight in other high-risk areas. It is structured, periodic, evidence-based, and tied to accountability. At a minimum, boards should expect management to provide five things.

  1. An inventory of material AI use cases, categorized by risk and business impact.
  2. A governance structure that identifies owners, review forums, escalation paths, and the role of compliance, legal, risk, audit, and technology.
  3. Clear policies and boundaries around acceptable use, prohibited data, high-impact decisions, and when human review is mandatory.
  4. Meaningful reporting. Not just adoption statistics, but risk indicators, incidents, model or vendor changes, validation results, and material control exceptions.
  5. A remediation and monitoring process that reflects the dynamic nature of AI.

That is consistent with COSO’s broader framework, which stresses alignment with organizational goals and risk appetite, the use of relevant information, internal communication, ongoing evaluations, and the communication of deficiencies. This is where I would encourage boards to think less in terms of “AI briefings” and more in terms of “AI oversight cadence.” A one-time presentation is not governance. A recurring structure is.

The Board Does Not Need More Hype. It Needs Evidence.

One risk in the current market is that AI discussions are still drenched in promotional language. Faster. Smarter. More innovative. Transformational. Useful words, but not enough for a board discharging fiduciary obligations.

Boards need evidence. This is where the compliance function can shine. Compliance professionals know how to convert aspiration into evidence. We know how to build a record showing that oversight is not merely claimed, but exercised.

And make no mistake, documentation matters. Structured communication and clear records are essential for reconstructing decisions, demonstrating accountability, and supporting regulatory or audit review. That principle runs through effective compliance practice generally and becomes even more important in AI governance, where organizations must often explain not only what decision was made, but how the process was overseen.

Five Questions Every Board Should Ask Now

If I were advising a board chair or audit committee chair, I would start with five questions.

  1. What are our highest-risk AI use cases, and who owns each one?
  2. What information does the board receive regularly about AI adoption, incidents, and material changes?
  3. How do we know that management is validating AI outputs rather than simply trusting them?
  4. Where are third-party AI tools embedded in our environment, and what visibility do we have into the risks they pose?
  5. What evidence would we produce tomorrow if a regulator, auditor, or shareholder asked how this board oversees AI?

Those questions do not require the board to become technical. They require the board to become disciplined.

The Bottom Line

AI governance is moving quickly from optional good practice to expected governance hygiene. That is the real message the real message boards need to hear. Under a fiduciary-duty lens, the challenge is straightforward. Directors do not need to be AI developers. But they do need to ensure that management has built a credible system for identifying, governing, monitoring, and escalating AI risk. When AI touches material business processes, board silence is not neutrality. It is exposure.

The companies that get this right will not be the ones that talk most loudly about innovation. They will be the ones whose boards insist on visibility, accountability, evidence, and follow-through. That is not anti-innovation. That is governance doing its job.