Nominations Committee

ACCA P1考试：Nominations Committee

1. Background

As for remuneration, concern was raised during the 1990s over the appointment of directors in listed firms. Many institutional shareholders began to question if "the old boys network" was effectively operating a cartel on directorships, particularly for NEDs and therefore failing to take advantage of the available "gene-pool". Many considered this to be to the detriment of maximising shareholder wealth.

In addressing this issue the Higgs Report (2003) recommended that nominations committees be established in all listed companies.

2. Requirements of The Code

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.

Appointments to the board should be on merit, against objective criteria and with due regard for the benefits of diversity, including gender.

Plans should be in place for orderly succession for appointments to the board and to senior management, so as to maintain an appropriate balance of skills and experience in the company and on the board.

There should be a nominations committee which should lead the process for board appointments and make recommendations to the board.

A majority of members of the nominations committee should be independent NEDs.

The chairman or an independent NED should chair the committee, but the chairman should not chair the nominations committee when it is dealing with the appointment of a successor to the chairmanship.

The nominations committee should make available its terms of reference, explaining its role and the authority delegated to it by the board.

Perceived Advantages

Independent selection procedure.

Allows senior executives to concentrate on running the business.

Selection process not "captured" by an individual director (e.g. CEO).

Forward thinking on succession matters.

3. Principal Duties

In summary, the principal duties of the nominations committee include:

evaluating the existing balance of skills, knowledge and expertise on the board;

considering the ratio and number of executive and NEDs;

guaranteeing transparent procedures;

ensuring the board and individual board members are evaluated on a regular basis;

searching for appropriate candidates in a wide range of areas to ensure that it chooses the most suitable candidates for the business;

developing appropriate selection criteria;

ensuring that the new board members receive proper orientation and other necessary training; and preparing for succession planning.