Nomination Committee:

Appointment to the board as a corporate governance issue:

When new appointments are made to the board of directors,it is obviously important that individual selected should be someone with suitable skills and experience.The Board as a whole should also consist of individuals who collectively have an appropriate breadth of skills and experience to bring to the discussions and decision-making of the board.

 

To ensure that there is a suitable balance of power on the board,the system for nominating and selecting new directors should not put the choice into the hands of one individual or a small group of individuals.However,executive directors should have a voice in new appintments to b board.

• When the appointment of a new executive director is considered,the executive directors are probably in a better position than NEDs to assess the qualities of internal and external candidates for the position.

• The executive director should be aware of the skills and experience that they lack,and so can offer suggestions about the type of NED that they would like to add to the board.

 

Succession Planning:

In addition to selecting new directors for the board,the process of nomination also involves succession planning .Succession planning means planning in advance for the eventual replacement of key members of the board when they eventually retire(or in the event that they are dismissed).Succession planning applies in particular to:

• The board Chairman

• The CEO

• possibly,the finance director.

Institutional investors want reassurance that a company has plans for the eventual replacement of a successful chairman or CEO,so that the financial performance of the company will not be damaged when that individual retires or resigns.

 

2.Need for a nominations committee:

There are two main reason for having a nomination committee:

• When a vacancy on the board has to be filled,or when succession planning is considered the process of identifying and evaluating suitable candidates takes time.The board should delegate the task to a committee to save time and resources.The committee should then make recommendations to the board so that the full board takes the final decision about any appointment.

• The appointment of directors to the board,and the succession for top positions on the board,should be acarefully organized process.The Uk corporate code  states that there should be a formal rigorous and transparent procedure for the appointment of new directors to the board.Transparency can be achieved by requiring the nominations committee to present an annual report on its activites to the shareholders.

 

3.Main duties of a nominations committee:

The UK Corporate governance code states that the nominations committee should lead the process for board appintments and make recommendations to the board.The board should decide what the exact duties of the nominations committee should be.The Higgs Guidance suggests that the committee duties should include the following.

• To identify candidate to fill vacancy on the board,when these arise.

• To select a preferred candidate for nomination,and recommend this individual to the board for appointment.

• To consider succession planning.

• To review regularly the size and composition of the board,and make recommendations for the change if this is consider appropriate.

 

4. Composition of the nominations Committee:

The UK corporate governance code makes the following recommendations:

• A majority of members of the nomination committee should be independent NED.A minority of members may therefore  be executive directors.

• The chairman of the committee should be either the board chairman or an independent NED.However,the board chairman should not chair the nomination committee when it is dealing with the appointment of a succeddor to the chairmanship.

 

5.Nomination committee and appointment of a new chairman:

The Uk corporate governance code recognizes that the appointment of a new chairman for the companyrequires particular care to make sure that a suitable candidate is identified who will be able to give the company an appropriate amount of his(or her) time.

• For the appointment of a chairman,the nomination committee should prepare a job specification,including an assessment of the time commitment expected.

• A chairman's other significant commitments should be disclosed to the board before appointment and these should be included in the annual report.Changes to these commitments should be reported to the board as they arise,and included in the next annual report.

• No individual should be appointed to a second chairmanship of a FTSE 100 company.