What is the Law of Recency? The Law of Recency, also known as the Napoleon Era, refers to the act of effectively supervising the flow of power in a family organization. In the early days this was often done by the husband and father controlling the family company and ensuring that their wife or husband followed suit. However, with changing times, the idea of the "chairman" became more prevalent, and it became necessary for one person (usually the husband or father) to consistently control all company activities in order to ensure longevity and profitability.
:max_bytes(150000):strip_icc():format(webp)/recencyeffect-ad9121c5652d442db3a25a9bb7d60e11.jpg){kind=link}
One principle of the law of succession is that a company's senior management must always act in the best interest of the company. That means that if you have been chosen as a member of the senior management team, then you should be able to fulfill your role with regards to company goals and objectives. For example, in a large corporation it would be expected that you would have significant input and expertise on key business decisions. As such, if you happen to find a superior in the company that lacks this experience or skill, then there are likely to be problems that arise which will greatly affect the company's overall performance and result in shareholder's equity and quarterly profits suffering.
There are two distinct laws that apply to succession planning: The first is the general law of succession that governs the overall company policies. This generally states that a company must maintain an official written code of conduct that governs conduct between its senior management and its subordinates and is signed by the company's Board of Directors. This code may specify the manner in which a company's senior management must deal with the implementation and execution of its officers' duties and the manner in which any sale of company assets must be handled. This portion of the law of succession is referred to as the "salary review policy".
The second part of the law of succession is referred to as the "board ratings policy". This part of the code basically requires a company's Board of Directors to periodically evaluate the business's management during such periods as an annual general meeting and/or an extraordinary general meeting. These evaluations will generally focus on issues that could have a material impact on the effectiveness of the company and the way in which it performs. These evaluations will also cover other matters that have a material impact on the company's management and its ability to continue the successful operations that have made it a successful and oft-times winning business. In many instances, the company's Board of Directors will make these evaluations either at the request of the Management Company, or they may conduct their own internal evaluation of the business's management and its business prospects. The entire process of these evaluations is meant to provide the company with the opportunity to determine how well its management team is performing and if the decisions made by the management team are based on sound business principles.
As with any other aspect of business, the overall performance of a company relies on the overall performance of its Board of Directors. If the company's Board of Directors fails to properly and effectively conduct its affairs, then the results can and will be detrimental to the company. This is why it is essential for the business to have a Board of Directors that meets the needs of its stakeholders (i.e. the company's investors and employees). Without this type of balance among the various interests represented by the different stake holders, the overall effectiveness and future success of the company become highly unpredictable.
There are many aspects to the law of succession. Some of those aspects include but are not limited to the use of Trust Funds and nominee Guarantors, among others. Understanding the importance and role of each of these aspects plays is critical to the successful management and operation of a company. For additional information regarding the matter of succession, it is highly recommended that you consult with an experienced attorney who is familiar with corporate affairs and the laws of succession.