There’s an inescapable truth – or what Al Gore might have branded an ‘inconvenient truth’ – that when the best skilled and equipped are in charge, the chances of everything running like a well-oiled machine are greatly enhanced.
— Governance Matters (@GovernanceMatt) July 20, 2016
And we’ll only get these when factors like impartiality and objectivity take centre stage and bias, prejudice and self-interest are pushed to the wings and beyond!
Which brings me to the vital role the nominations’ committee plays in increasing the chances of an organisation – be it a not-for-profit or a commercial entity – purring along smoothly.
It ultimately comes down to its independence, which most will happily agree translates into heightened chances of a company having a board rich in diversity and skills required. And the research keeps reminding us that that well-managed diversity in any setting produces better results than you’d get in a mono-dimensional environment.
— Governance Matters (@GovernanceMatt) July 22, 2016
Let’s look briefly, then, at the role of the nominations’ committee, which is tasked with sourcing the right directors, with the right skills and diversity, to fill any gaps on the board.
In many companies, a standard nominations’ committee comprises three board members, chaired by the board chairman. They consider candidates and compile a shortlist before interviewing those on the list and making recommendations to the board, which ultimately makes the decision.
Being board members themselves, there’s always a danger that the net hasn’t been cast wide enough and the vested interests of the committee members may have been a factor, thereby compromising the board’s effectiveness.
Similarly, in member-owned companies where all directors are elected, there’s always the chance that someone, on a single issue ticket, might get up.
Take a sporting body as an example. This person may be passionate about his or her cause, let’s say it’s a gripe about the length of the length of membership waiting list, and he or she sets off on a well-intentioned crusade, promising to change the status quo if elected.
That’s all well and good, admirable even, but sadly, it doesn’t necessarily translate into a person with the skills and acumen to fill vital positions and perform pivotal roles on the organisation’s behalf.
Thankfully – and although not a legal requirement – there’s a growing trend towards organisations establishing independent nominations’ committees comprising the chair of the board and two independent members from outside the organisation. Ideally, these will be well-known, respected in their fields and people held in high regard.
They’ll then attend to the process – the shortlisting, the interviewing, the making of recommendations for board decision – and hopefully arrive at the best decisions…for the organisation and its shareholders or members.
Importantly, this model is proving to be increasingly acceptable to shareholders and members who celebrate the impartiality and feel comfortable that they’ll get a board member who fills the gap in terms of skills and diversity.
And with it, the dynamics of the discussion in the boardroom and the quality of decision-making will improve, the range of issues canvassed and perspectives considered increase, innovation abound and success soar.
Until next time,