Nomination committee

The nomination committee sets the framework for the board itself through its recommendations for appointments, evaluations of composition, and planning for future succession

Category
Committees

Introduction to the nomination committee

The role of the nomination committee straddles all committees of the board as well as the board itself. Its remit covers the current and future composition of all these forums, with the exception of the appointment of a new chair of the board. This latter is most often led by the most senior independent director on the board unless they are a potential candidate, in which case another non-executive board member would take the lead. The nominations committee does not work in isolation but draws on input from the existing board directors and committee members, as well as external experts, particularly on selection, evaluation and training. An increasingly topical area for nomination committees is that of boardroom diversity and dynamics. As organisations come to realise the benefits of diverse boards, the role of the nomination committee in identifying suitable candidates from a broader range of backgrounds is becoming more important.

The nomination committee sets the framework for the board itself through its recommendations for appointments, evaluations of composition, and planning for future succession. It has a key role in identifying expertise that could add additional value to forums, whether in the near or long term.

The nomination committee interacts closely with the remuneration committee, and these two forums can be combined. You may also consider combining a nomination committee with a governance committee reflecting the importance of the governance framework and its members.

Duties, responsibilities and tasks

In general terms, the nomination committee acts as an internal audit for the board and their committees in respect of their composition and effectiveness. The nomination committee must give consideration to the diversity, skills, experience and knowledge available to these forums. Specifically, this should be in respect of individuals, individual roles, the board or committee as a whole, and the interaction of appointed members when undertaking their roles. This means that the committee has a dual focus on both the individual appointees as well as the board or committee as a collective. The appointment, retirement or removal of one individual must be considered against the impact on the wider group and not just in isolation. When considering the full composition, the committee should consider the dynamics of the board and the effectiveness of its current composition, as well as any areas where new members could enhance or improve the effectiveness of the board.

In practice, the board establishes a nomination committee to:

Plan: ensure plans are in place for orderly succession to both the board and senior management positions. Within this, they should oversee the development of a diverse pipeline for succession.
Identify: lead the process for determining board and executive appointments
Evaluate: undertake or oversee regular evaluations of the board and its committees
Train: ensure induction and ongoing training is in place for directors/board members, executives and committee members

An effective succession plan should be maintained for the board and senior management positions, incorporating details on what objective criteria should be used for appointments and any specific objectives or deliverables of the roles. The nomination committee will periodically review the policy for the selection and appointment of board members and senior management and make recommendations to the board. Within this, there is an expectation from governing bodies, funding councils and other stakeholders that this should promote diversity of gender, disability, social and ethnic backgrounds, cognitive and personal strengths.

While the committee does not usually have the responsibility for the practical appointment of board members, they do have oversight responsibilities with regard to the process of appointment and induction of new directors and should prepare or oversee the preparation of a description of the roles, capabilities and expected time commitment for any particular appointment. The process should incorporate an evaluation of the balance of knowledge, skills and diversity of the board, and the nomination committee should decide on a target for the representation of underrepresented characteristics or demographics on the board and prepare a policy on how to meet that target (the requirements of the Code for Sports Governance will be instructive here, and this work might feed into the Diversity and Inclusion Action Plan required of all funded organisations). The process should be clear and applied in all scenarios.

Nomination committee members may be requested to be part of the interview panel or assessment process.

As the use and understanding of nomination committees develops, there has been a move to use the nominations committee to give attention to the organisation below the board and executive level. The added benefit of this is that the committee can use it as a means to identify future candidates for board-level roles in support of their succession planning. In addition, it embeds a consistent approach to evaluation through the business, aligning board reviews to reviews undertaken throughout the company.

An alternative approach to connecting board-level evaluation and succession planning is for the nomination committee to receive information on reviews undertaken by HR within the company. This can be in the form of a general report or through HR identifying talent early, which can then feed into succession planning considerations. This can also give nomination committee members additional insight into the wider business of the organisation. Additionally, it can be used as a means of identifying training or development needs to support future board talent that can be adopted in the learning and development plans of the business.

The nomination committee should review the structure, size, and composition of the board to ensure they remain appropriate. Within this, there should be a formal evaluation process on at least an annual basis. The chair may lead on this. Specifically, the board and its committees should have a combination of skills, experience and knowledge reflective of the organisation, the wider sporting environment and the responsibilities of the relevant forum. Consideration should be given to the length of service of the board as a whole, in line with the requirements of the Code for Sports Governance, with membership being regularly refreshed to ensure that contribution does not become repetitive, the forum continues to be relevant and meetings are dynamic and results-focused.

An annual evaluation of the board should be undertaken to consider its composition and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively and has relevant skills to contribute to the board at its current stage and looking forward, as opposed to when they were appointed.

Boardroom dynamics underpin the effective functioning of the board and, while considerable focus is given to the technical skills and experience of board members, the dynamic between individuals and the board as a group often gives a better reflection of how effective the board will be. Nomination committees should be mindful that the dynamics between individuals are key drivers of success and should be considered carefully when reviewing the board’s composition, making appointments, or drawing up succession plans.

Evaluation is only beneficial if the results are acted upon. The nomination committee should liaise with the chair and governance lead in identifying and documenting an action plan to address the results. The nomination committee should oversee and monitor the implementation of the identified actions, which may include development plans, training, workshops or other formats either for individuals or the board as a group.

Ongoing training for directors should include that specifically for their director role as well as wider training related to the organisation, whether technical or soft skills. Consideration should be given to the inclusion of non-executive directors in executive training or training available elsewhere in the sports organisation. Most non-executive directors will maintain their own continuous professional development (CPD), which can be evidenced during the evaluation process.

Terms of reference

The terms of reference of the nomination committee, outside of their specific roles and responsibilities, follow standard content.

The role of the nomination committee is primarily to recommend, advise, plan and oversee. They do not usually have the specific authority to progress to the appointment of directors or board members. If this is the case, it should be made clear in the terms of reference to what extent the committee has authority to appoint, including any constraints, controls or guidance to be followed. Remuneration of directors and senior executives falls under the remit of the remuneration committee if there is one incorporated as a separate forum.

Nomination committees generally only have scheduled meetings once or twice per year to cover the core functions of monitoring board and committee effectiveness, planning future succession and reviewing evaluations. However, terms of reference should allow for both scheduled meetings and the ability to call emergency meetings. These may be required for unexpected departures or changes in requirements. For example, a significant shift in strategic focus may require additional or changed board representation which the nomination committee should be heavily involved with.

Authority is given to the committee to appoint external providers for selection, evaluation and training, noting that budgetary constraints or related guidelines set by the board and the company should be adhered to. This may be particularly important when the identification of candidates falls outside of the committee’s competence – for example when actively seeking to alter the diversity profile of the board. Any external appointment would also be prior agreed with HR to align it with the wider organisational model and any areas where the company has specific requirements. For example, sport-specific technical training may be better served through spending time with senior management or technical experts within the sport instead of appointing external trainers. This has the dual advantage of tailoring the knowledge sharing to the specific sports organisation and giving employees exposure to senior independent committee and board members. Any external appointment should also be disclosed in the annual report, reflecting the purpose of the appointment and any connections the appointee may have with the organisation.

Composition

There are no specific guidelines on the number of committee members that should be appointed or the specific skills they should have other than that those noted in relation to skills, experience and knowledge are equally relevant to nomination committee membership. As with the remuneration committee, a high degree of emotional intelligence and discretion is required when fulfilling the role.

There is no restriction on the CEO being a member of the committee, although most include CEOs as an invited attendees rather than a formal committee member. There have been instances, however, where shareholders or members have expressed concern at the CEO being a member and heavily involved in such an influential forum.

It is recommended that a majority of members of the committee should be independent non-executive directors. The chair of the board should not chair the committee when it is dealing with the appointment of their successor.

Interaction beyond the committee

The nomination committee and its members will have a core understanding of the board, its dynamics, and each committee of the board. In order to deliver in their role, they must understand the deliverables of each forum and the interaction between them. They must appreciate the nature of the governance structure and be able to work effectively within it.

The closest working relationship is with the chair of the board and the remuneration

committee. If it is a separate forum, it is expected that the chair of the nomination committee will attend each remuneration committee meeting and maybe a formal member. It may also be beneficial, where these two forums are not combined, for one individual to be the chair of both committees, albeit that the membership may be different. By its nature, at least one of the nomination committee members will have interacted with directors and senior executives during their appointment process.

Given their intimate knowledge of each candidate, the role they have been appointed to and the deliverables that their unique experience will be able to deliver, members of the nomination committee have an in-depth insight into their colleagues. As such, their role in being able to support appointees during their initial appointment should not be underestimated. They can provide a support network to individuals to enable them to deliver successfully in as short a time period as possible.

Some larger organisations pair their non-executive directors, whether members of the nomination committee or not, with senior executives and rising talent for mentoring purposes. As with any senior one-on-one mentoring programme, this benefits both the identified individuals as well as the independent directors, giving the former access to senior executives with experience outside of their organisation and enabling the directors to gain a personal insight into the organisation through a different lens.

Reporting

The work of the nomination committee may be described in the annual report and/or governance statement. This might include:

the process used in relation to appointments, its approach to succession planning and how both support developing a diverse pipeline
how the board evaluation has been conducted, the nature and extent of an external evaluator’s contact with the board and individual directors, the outcomes and actions taken, and how it has, or will, influence board composition
the policy on diversity and inclusion, its objectives and linkage to organisational strategy, how it has been implemented, and progress on achieving the objectives
the diversity balance of those in the senior management and their direct reports

Specific data included in the report, such as diversity reporting, will be provided by the HR function. Otherwise, contents of nomination committee reports are often general in nature, reflecting the overarching approach of the committee in terms of board evaluation, board member tenure or approaches to succession. Changes at board level are reported in hindsight, stating facts about tenure and departure and appointment of replacements. Rarely is further insight provided either in the annual report or in other shared papers.

The challenge is to provide good reporting on the actions of the committee, how strategic goals are addressed in relation to future succession planning, board evaluation processes, recognising any talent identification processes and being open about skills analysis of current and future leaders.

Supporting the committee

Practical issues such as length of board meetings, agendas and content of board packs form one part of board evaluations. Ensuring receipt of advice and sharing best practices on these topics with committee members is a proactive way to support the nomination committee.

Some committees also seek the input of the company secretary or governance lead to provide best practices or knowledge from other boards that they may currently or previously have supported. As a professional contributors, company secretaries may have been involved in supporting a wider range of boards and committees through their careers than the committee members themselves may have attended. As such, they can provide knowledge and experience that can support the nomination committee in their deliberations.

A good nomination committee will seek to obtain input from a wide range of contacts and those individuals supporting the committee can provide both their own feedback, if requested, as well as facilitate the contribution of other employees. This is particularly beneficial when the nomination committee is only composed of independent directors with limited connections to employees outside of the executive team. The governance lead and HR representatives should also be prepared to enhance their contribution through sharing expertise and knowledge from their own wider external network.

In some cases, nomination committee members may seek input from the wider organisation or external contacts in relation to new board positions, whether in terms of potential candidates, role descriptions or external providers. Any contributor to the nomination committee, or any committee or the board itself, is in a unique position to be able to respond to such requests and should recognise this request as a means for the nomination committee to widen their knowledge and contacts. It should also be recognised that this input should primarily be on request from the committee or its members. The nomination committee has the responsibility and delegated authority to act in this regard. Any third party that they request input from, whether formally or informally, does not have this level of authority and has not been appointed to share their views or contribute directly to the discussions.

The HR function of a company has a considerable role in supporting and interacting

with the nomination committee. This falls across training and development, identification of future leaders and proposing ways that the work of the nomination committee can be more effective through coordination with HR or interaction with the wider workforce. More obviously, the practical implementation of board appointments and new member onboarding is likely to be driven by HR and the governance lead, with the nomination committee having oversight of the process. HR members should ensure they are aware of the terms of reference of the nomination committee and identify any areas where they can be supportive or work in collaboration.

Conclusion

One concluding point is who appoints and evaluates the nomination committee itself? In practice, it is the board that has appointed them and whom the nomination committee reviews. This is a closed circle that could be abused. However, if clearly defined, appointed and applied appropriately, the benefits of an effective and, most importantly, independent nomination committee can be immense.

They have a significant role in shaping and modelling the board of an organisation which cascades into reflecting and influencing the culture of that organisation as a whole. By applying recommendations in a consistent and measured way, the nomination committee can support the chair, CEO and the wider business and can have a positive impact on the success of an organisation. Conversely, poor recommendations, insubstantial board reviews, board evaluations findings that are not followed up, and a lack of future succession plans are areas where the nomination committee can have a significantly negative impact.

While the workings of the nomination committee are often less contentious than the remuneration committee, the outcome of their actions underpins the company and can build a robust foundation for an organisation.