The Rise And Rise Of The Nominating And Governance Committee
Nominating committees were once the home for directors that did not understand the business well enough to serve on either audit or comp. Today's nom-gov looks very different.
The Corporate Board Member article, "The Rise And Rise Of The Nominating And Governance Committee," was written by Russell Reynolds Associates Consultant Anthony Goodman on what to expect from today's nominating committees. The article is excerpted below.
Today’s nominating committees are often at the very heart of the most pressing governance debates impacting a company, from oversight of ESG, to gender diversity and corporate culture, to driving CEO succession, meeting with shareholders, and offboarding spent directors.
That is far cry from old-style nominating committees that were often the home for showpiece directors that did not understand the business well enough to serve on either the audit or compensation committee. Those check-the-box committees met once or twice a year and followed a bland agenda of approving committee charters, with an occasional foray into a search for a new director. Perhaps they should have been more accurately called “nominal committees.”
So what are nominating committees spending their time on? There are a handful of tasks they have taken on, although the exact nature of the committee upgrade varies from company to company. Here are some examples:
• Board refreshment and evergreen search processes. Board recruitment continues to be the primary task of nominating committees but what the committee does has changed radically. The focus on board diversity requires a diligent, ongoing recruitment process in order to get top talent on the board. Our review of corporate governance trends for 2020 reported that investors would start taking a broader view of diversity to include racial and ethnic diversity: “Vanguard has announced it expects companies to publish their efforts to improve boardroom diversity and will begin asking about the race and ethnicity of directors. The NYC Comptroller’s Office (custodian of the $195 billion NYC Employees’ Retirement System) is asking companies to implement a modified version of the National Football League’s “Rooney Rule” and adopt policies to ensure women and people of color are on the initial list for every open board seat, as well as for CEO appointments.” The need to refresh the board has also led many committees to conduct more robust and probing individual director assessments prior to re-nomination.
• Oversight of ESG matters. Topics like ESG and Corporate Social Responsibility are becoming a greater focus of the nominating committee agenda, changing the role of the committee to one responsible for broader risks faced by the company. One committee chair highlighted the adjacency of board oversight of corporate culture, “More is happening in the committee due to an increasing number of shareholder proposals and the need for greater outreach and engagement by the board.” The focus on ESG and corporate culture have moved the nominating committee deep into discussions that are increasingly central to business strategy.
To read the full article, click here.