Blog : BOARD TALK
|Posted on May 6, 2016 at 9:20 AM|
Research just out from EY and ICSA: The Governance Institute finds that nomination committees in corporate boardrooms are "delving more deeply" to find executive talent. They are said to be "no longer thinking about upcming board changes, but are now looking more deeply into the organisation, casting the net wider and thinking further ahead to identify and nurture top talent."
Good to hear - and it's about time. The composition of boardrooms of publicly-listed companies has been the focus of this blog on and off for a long time - put 'headhunters' in the search engine.
My writing on boardroom composiiton has also been featured by the think-tank, Policy Network - and I am now a member of the steering group of their recently launched Centre for Progressive Capitalism. That is intended to be more context, than self-promotion.
But it is also an indication of how the issue of the role of the nomination committee - on which I have also written for the global executive search firm Amrop in Nominations Committee: Raising The Bar- has been steadily rising up the corporate governance agenda.
“While often portrayed as the poor relation of the audit committee and the remuneration committee, with a role that is less clearly defined and less high profile, the nomination committee is arguably the most important,” says Peter Swabey, Policy and Research Director at ICSA.
“It plays a pivotal role in appointing directors to the board and, if the board lacks the right balance, knowledge, skills and attributes, the likelihood of it and its committees operating effectively is greatly reduced. Equally boards have a duty to secure the long-term health of the company and that is very much dependent on a strong executive pipeline from which future leaders can emerge”, he adds.
The report, Nomination committee: coming out of the shadows, is the result of a series of roundtable discussions with board chairmen, nomination committee chairmen and members, and company secretaries from over 40 listed companies (predominantly from the FTSE 350).
While nomination committees are currently functioning in a wide variety of ways dependent on the size of the company, the size of the board, the sector in which the company operates and the stage of its development, the research finds that overall, many companies are looking at improving the way their nomination committees operate in the following areas:
- Boards, through their nomination committees, are increasingly seeking assurance that a good quality pipeline is in place and are challenging what the executive management team is doing to enhance it.
- Nomination committees are casting the net wider to identify potential directors, which reflects a growing awareness of the benefits of, and demand for, increased diversity and changes in the skill sets needed at board level.
- Boards are looking further ahead when developing their long-term strategies, in order to anticipate the skills and resources needed both in the boardroom and in senior management to deliver on that strategy.
As Mala Shah-Coulon, an executive director in EY's corporate governance team put it: "Given 63% of listed companies cite people-related risks including staff and skills retention as one of their principal risks, making it the second most common principal risk disclosed by boards, it is encouraging that we are starting to see a shift."
In other research just out from ICSA, a poll suggests that "companies consider reputational damage resulting from association with something like the #PanamaPapers to be more of a deterrent than a fine."
Ah, 'reputational damage' - that would be damage caused by actions of....people. And we are back to company culture.
Let's hope that nominations committees have a clear idea of what that is, and remember to keep talking to Remuneration and Audit as well before they get too excited about their new-found visiblity on the radar of corporate governance.