The study reveals that the effect continues in the longer term too. Over the course of the study companies with unplanned successions – where no replacement was immediately announced to the markets - saw their share prices fall by 2.1 per cent more than their peers with planned succession processes. 15 per cent of the changes over the three-year period were classified as unplanned.

The analysis confirms that the markets dislike any change. On average, companies performed 9.6 per cent worse than their competitors for each change of CEO during the study. Effective succession planning clearly helped to mitigate this effect, but could not remove it entirely. Over the same three-year period, however, companies with no successions saw their share prices outperform their benchmark by 3.6 per cent.

The research also found that companies prefer to promote new CEOs from within; nearly two thirds of new CEOs announced during the period of the study were internal appointments. This has a significant effect: on average, companies that promoted from within performed 11.7 per cent better over the three years than those recruited from outside.

Commenting on the results, Ruth Spellman, Chief Executive of Investors in People UK, said,

“This report should serve as a wake up call for UK plc. It shows that succession planning can have a major impact on market value, and so clearly is an issue that no company can afford to ignore. Businesses need to have systems in place to ensure that they are prepared when senior managers leave – whether it is expected or not.

Ms Spellman continued,

“However it is not only FTSE-listed companies that need to take notice. Employees and customers dislike uncertainty as much as the markets – they may choose to vote with their feet if the company head is not replaced in an efficient manner. Proper succession planning simply make good business sense. It ensures any company is well placed to cope with change and can avoid being derailed by departures. Taking control of the agenda is vital.”

The Investors in People Standard and associated Profile tool (which promotes continuous business improvement) are frameworks that help employers of all types and sizes enhance performance through the development of their people.

- Ends -

Notes to editors

The centre for economic and business research analysed companies listed in the FTSE 350 between May 2002 and May 2005. Companies involved in mergers or takeovers, or that joined the index after May 2002 were discounted from the analysis.

The number and type of corporate successions within the FTSE 350 during this period were measured and compared with company share price performance. Four sector benchmarks to help control for non-company-specific factors affecting their respective industry areas were used. These benchmarks were; Financial Services; Manufacturing; Other Non-manufacturing; and Other Services.

 About Investors in People

1. Investors in People UK was established in 1993 to provide national ownership of the Investors in People Standard and is responsible for its promotion and branding, quality assurance and development.

2. The Investors in People Standard provides a framework for improving business performance and competitiveness through good practice in human resource development.

3. The Investors in People Standard is promoted and developed by Investors in People UK - a public body whose main stakeholder is the Department for Education and Skills.

4. The Investors in People Standard is delivered by a partner network:

· In England, the Learning and Skills Council (LSC) and Business Links.

· In Scotland, Scottish Enterprise (SE) or Highlands and Islands Enterprise (HIE).

· In Wales, the National Council for Education and Training for Wales and the Higher Education Funding Council for Wales, jointly known as Education Learning Wales (ELWa).

· In Northern Ireland, the Department for Employment and Learning.