The nomination committee – coming out of the shadows

  • Share

The nomination committee has been regarded by some as the ‘poorer cousin’ of the audit and remuneration committees, yet arguably, it is the most important. It determines board composition, and therefore ultimately board effectiveness – a vital ingredient in a company’s long-term success.

The nomination committee – coming out of the shadows, produced in partnership with ICSA: The Governance Institute, focuses on the committee’s role and how boards can improve its work.

The report is based on a series of roundtable discussions we facilitated with board chairmen, nomination committee chairmen and members, and company secretaries, from over 40 listed companies, predominantly FTSE 350. It contains practical considerations for board and nomination committees, and explains that many companies are looking at improving the way their nomination committees operate in the following areas:

  • Looking deeper into the company to identify and help develop its future leaders
  • Casting the net wider to identify potential directors
  • Thinking further ahead than the immediate replacement of a retiring board member.

This report follows our 2015 report Board effectiveness – continuing the journey, produced with The Investment Association, in which we started to examine key themes such as succession planning and talent management.

Download The nomination committee – coming out of the shadows.


Twelve questions for boards and their nomination committees to consider:

 

1

What skills does the board need to deliver the company’s strategy (over the relevant period) and deal with changes in the business environment?


2

If the board needs new skills, when will they be needed and what is the plan for acquiring them?


3

How will you manage the next cycle of board appointments and reappointments, and how do board and director evaluations feed into that process?


4

What is your contingency plan for dealing with unexpected departures?


5

What assurance do you need from management about the nature and quality of their executive and senior management development programmes? How involved does the board or individual directors want to be in those programmes?


6

How visible are potential executive directors to you and what role might you play in their development (for example, through mentoring)?


7

What is your policy on executive directors and senior managers serving as NEDs on other boards?


8

What is your plan for ongoing training and development of directors after they have joined the board and how do the results from your board evaluation feed into this?


9

What criteria are used by the board and its advisors to identify potential NEDs? How objective are they and how are you satisfied they will not rule out individuals who have the necessary skills but may, for example, be lacking board experience?


10

What processes do you have for assessing the character and behaviours of potential new directors?


11

How could you improve your reporting and terms of reference to give shareholders and other stakeholders better insight into and assurance on how the nomination committee is exercising its responsibilities?


12

How could the nomination committee’s interactions with other committees, e.g., the remuneration committee, be improved?