Incumbent

What Is an Incumbent?

The term incumbent refers to an individual who currently holds a set of responsibilities within a specific office as part of a corporation or within a branch of the government. As the incumbent, this person has an obligation to the position or office they hold. All incumbents of an organization such as directors and officers are listed on an incumbency certificate. An incumbent may also refer to the obligation itself or to the sense of duty surrounding the accomplishment of a particular task or objective.

Understanding Incumbents

The word incumbent has several different meanings depending on the context in which it's used. It is most commonly refers to a person with a position in a specific office whether they are part of a company or an elected official. This person has certain responsibilities that come with their position. Business leaders such as chief executive officers (CEOs) are incumbents of a company, while a senator is a political incumbent.

The term incumbent can also be used to describe the duties a particular individual is required to perform or the obligation they must satisfy. It can also refer to a company that is powerful with a large portion of its industry's market share. Further, the term incumbent can be related to various business standings and relationships. This is explained further a little later on.

As noted above, companies list their leaders on an incumbency certificate. These leaders include current directors, officers, and may also include main shareholders. This certificate is considered an official company act just like an annual report. As such, third parties including shareholders are able to rely on it being accurate.

As an investor, you can rely on the accuracy of an incumbency certificate — an official act of a company.

Examples of Incumbents

In Business

An incumbent in business most commonly refers to a leader in the industry. While it may normally refer to a person, that isn't always the case. It can also be used to describe a company or a product as well. A company may, for instance, possess the largest market share or may have additional sway within the industry. As such, incumbents in an industry may change in response to changes in the market. For example, Blackberry producer Research in Motion was once considered an incumbent of the smartphone market in 2007. During the fourth quarter of 2014, Apple, the producer of the iPhone, replaced it as the incumbent based on worldwide sales.

An incumbent can also refer to business relationships such as those between a supplier providing materials to a different business. The supplier currently in use is considered the incumbent due to the associations of the supplier holding the position. If a new supplier wants to take over the duties of the current supplier, the new supplier is a challenger to the current supplier’s incumbency.

In Politics

When referring to a position in politics, the incumbent is the individual who currently holds the office or position. While the term applies to the person holding the position at all times, it is more commonly used during elections as a way to differentiate two candidates in cases where the current position holder is running for a second term. The person running against the incumbent is often referred to as the challenger.

Holding the incumbent position may be seen as advantageous depending on the current sentiment of the associated constituents. If the constituents feel current circumstances are acceptable, there may be a higher inclination to vote for the incumbent. If the constituents disapprove of the situation resulting from the incumbent's policies or actions, they may be less inclined to vote for them.

Incumbents are not required to attempt to maintain the position they currently hold, though they do maintain the title until the day they step down from office. If a new position is created, and no one has stepped into the position prior to the first election, there is no incumbent for the position.