Boardroom Brief: Nominations committees play a crucial role
JOHANNESBURG – Nominations committees play a key role in ensuring a board has the right skills, now and in the future.
There's a growing belief that their role will expand.
If talent is any organisation's greatest asset, and if the tone is set at the top, then who sits on the governing body of the organisation is clearly a matter of great importance.
That is why governance codes – and the King IV report on Corporate Governance for South Africa is no exception – recommend that a dedicated committee be put in place to oversee this critical function.
King IV recommends that all the members of the nominations committee should be non-executive members of the governing body, with the majority being independent.
King IV also suggests that the chairperson should be a member of the nominations committee.
The code furthermore recommends the following focus oversight areas for this committee: The process for nominating, electing and appointing members of the governing body; succession planning in respect of governing body members; and evaluation of the performance of the governing body.
It’s perhaps worth remembering here that the principle of proportionality should be used to adapt these recommendations to a particular organisation's circumstances. Thus, the role of the nominations committee could be fulfilled by the board as a whole, or another of its subcommittees – the important thing is that the desired outcomes are achieved.
In line with King IV’s general approach, it recommends that the process for election of non-executive directors should be both formal and transparent, and that nominations should be approved by the board as a whole.
An important part of this process is a rigorous due diligence process to ascertain that prospective governing body members have the skills the board as a whole needs at that particular point in time.
It is also vital that candidates undertake the same exercise to ensure the organisation is sound and ethical, and that its aims resonate with them.
When looking at the skills needed, nominations committees should not focus solely on the technical or professional skills required.
Given their growing diversity, it is important that members have the soft skills needed to listen and build consensus even when there is significant disagreement.
It makes sense for nominations committees to oversee board evaluations because these will naturally provide a way for the committee to assess how successful it has been, and what process improvements are needed.
In the same vein, nominations committees are often responsible for overseeing the process of on-boarding new directors and guiding their continuing development.
As we've seen in recent months, nominations committees need to look beyond the process of filling vacant positions – they need to have plans in place for when unexpected vacancies occur.
Organisations risk reputational damage if a senior post is vacant or in a caretaker's hands for too long.
Nominations committees must take a long view.
Many increasingly feel that long view must also encompass the notion of looking ahead at the changing matrix of skills a board will need in the future, and begin identifying candidates early on.
These skills will be in short supply, at least initially, and thus securing them will pay dividends.
To do this successfully, the nominations committee will have to understand the organisation's strategy very well indeed.
There is growing evidence that nominations committees are also being asked to take on a broader role. One area would be providing input into executive appointments, and helping to build a talent pipeline within the organisation.
In conclusion, one should remember that King IV emphasises disclosure – apply and explain – as a way of encouraging governing bodies to apply their minds to what they are doing and to be able to explain their thinking.
Given the importance of what nominations committees do, it is vital that they give due thought to how they report on what they are doing.
Parmi Natesan and Dr Prieur du Plessis are respectively chief executive and a facilitator of the Institute of Directors (IoDSA); email: [email protected]