In our previous blogs, we have discussed the concept of board committees and the vital role they play in the corporate governance of an organisation. We have already covered the audit committee and the social and ethics committee. Today, we move on to the next standard board committee, the nomination committee.
The nomination committee is crucial for the efficiency, effectiveness and overall governance of the board. It evaluates the board’s composition and assesses the characteristics, skills, knowledge, and attributes required of persons appointed to the board. One of its responsibilities is to ensure that the best candidates are chosen for each seat on the board.
King III™ proposes that the committee should solely consist of members of the board. The majority of the members should be non-executive and independent. Ideally, the board’s chairperson should also be the chair of the nomination committee. If that is not possible, another independent non-executive director should take the chair.
The nomination committee is tasked with specific responsibilities and must help the organisation to stay focused so that it can achieve its objectives and remain sustainable. The committee is fundamentally important because it performs the most essential and important duties of the organisation. The board’s most crucial responsibilities include overseeing the organisation and driving strategic planning with the due diligence.
The nomination committee is charged with the following (keep in mind that tasks and duties can differ based on the company and its goals):
It carries out annual examinations of the board’s competency when it comes to achieving the company’s objectives. The committee must ensure that all board members are capable, skilled, and experienced in their area of expertise to ensure the organisation’s sustainability and success. The board must be aligned with the company’s overall strategy, which ultimately paves the way for them to decide the company’s future.
Board recruitment and succession planning
The nomination committee closely monitors executive recruitment and is aware of succession risks, ensuring that plans are in place to alleviate the effects of losing key board members. Moreover, the committee keeps a lookout for promising potential candidates for the board and identifies opportunities presented by new members. Neglecting these duties may have disastrous results because of the major influence board members can have on an organisation.
Induction, training, and new director development
When new directors are appointed, the nomination committee members are among other things tasked with induction training – informing the appointed directors about the company’s strategy, culture, goals and management procedures. Ongoing training is necessary to ensure that both new and existing board members are suited to their roles and committed to their continued development as directors.
Recruiting via company strategy
The nomination committee is often tasked with clarifying the company’s long-term strategy. Vital decisions on board recruitment can then be based on the company’s needs and current and future goals, plans and projects.
Nomination committees have no specified guidelines and rules stating how they need to perform; however, here are some of the recommended practices:
- A competent and adequately skilled nomination committee should focus on building a powerful board composition. It must ensure that board members have the required expertise and knowledge regarding the company’s operations, come from diverse backgrounds, and possess different, unique skill sets.
- It finds and recommends to the board a replacement for the chief executive officer when that becomes necessary.
- It ensures that formal succession plans for the chief executive officer and senior management appointments are developed and implemented.
- It annually confirms the board’s current view on succession planning for the board.
- It annually confirms that none of the directors has become disqualified.
- It outlines roles and responsibilities to assist with accountability and efficiency.
- It engages in effective risk management, thoroughly screening all candidates for board appointments to minimise any risks candidates may hold to the company.
Today’s corporate environment requires a proactive nomination committee to ensure the overall sustainability of an organisation. The committee paves the way for an efficient and effective board and executive management consisting of quality leaders with the skills and experience to meet the company’s mission and vision.
Okina Company Secretarial Services can help you with the committee setup, board evaluations, professional development, director induction, and guidance. Contact us at firstname.lastname@example.org.