Recently, Diligent launched new governance data tools designed to feed the curiosity of board directors with better access to insights and analytics. Last week, I had the opportunity to chat with corporate directors in Amsterdam at a meeting hosted by CGLytics about how these tools might impact the work of a company’s Nominating and Governance Committee. The conversation got me thinking…how is the role of the corporate board’s Nominations and Governance committee changing?
It’s true to say that the work of the Nominating and Governance Committee has always been important. This committee is typically charged with identifying qualified candidates for open board seats, and it spearheads the annual board self-evaluation process. But in years’ past, the committee wasn’t always perceived as a year-round, hardworking segment of the board. Rather, there was a governance gap – the committee only sprang into action when a board seat was vacated by the retirement of a long-tenured director. Or, when the board was in the process of sourcing the next CEO for the company, sometimes the Nominations and Governance Committee would play a role in helping to organize the search.
So, what’s changing? Because these days, directors are telling us that the Nominations and Governance Committee has become one of the hardest-working board committees.
With the advent of modern governance, directors serving on Nominations and Governance Committees recognize a poorly-governed organization and ineffective leadership can destroy value, ruin lives and devastate reputations. Now, more than ever, companies are striving to onboard highly qualified diverse board candidates to avoid blind spots, reduce risk, create value, and become more resilient.
In the era of modern governance, the corporate Nominations and Governance Committee might be the busiest – and one of the most influential – board committees.
Case in point – listen to our recent interview with corporate director Nora Denzel on The Corporate Director Podcast. What you’ll hear is Nora’s description of how being a member of this committee allowed her to help expand her board’s network to locate a broader candidate pool – and helped to shore up the company for the long-term, while also satisfying calls from investors, shareholders and other stakeholders to bring more diversity onto the board.
As depicted above, this powerful committee now also tackles the following roles:
- Candidly assessing the strengths of the current board, identifying talent gaps, and determining plans for refreshment, and implementing those plans over the course of months or years
- Determining areas of diversity missing from the board and executive leadership – including demographic, geographic, and skill set diversity, as well as the access to the most important networks that might be missing within current leadership
- Implementing new digital tools that help the board expand its network of qualified candidates by drawing from a global database of qualified candidates. These tools can also help pinpoint potential conflicts of interest, and help identify those within the existing board who have important connections they can make – for example, during a merger or acquisition of a new enterprise
- Spearheading a board evaluation process designed to measure board performance (addressing the high percentage of directors who believe someone should be removed from the board for performance reasons)
- Ensuring each committee is chaired by the most appropriate director, and making suggestions to directors (and committee chairs) about which committees each director should join
- Creating a solid on-boarding plan for incoming new directors that helps them get up-to-speed quickly, and establish the key relationships they’ll need to be a phenomenal director
- Taking the lead in executive leadership succession, transition, or expansion plans and processes – from identifying the criteria, collecting the data, hiring the search firm and more.
Being proactive about these processes helps companies turn governance into a competitive advantage – in part by preventing possible actions by proxy advisors and other activists to fill board seats with new candidates, but also by bringing a broader chorus of voices to the table – ensuring the board has a more nuanced and balanced set of perspectives to draw from when making decisions.
Let’s hear it for the leading-edge Nominations and Governance Committee Chairs out there who modernizing boardroom practices! If this topic is intriguing, I encourage you to join us at our upcoming Modern Governance Summit in Orlando, Florida the second week of September, where we’ll be exploring these issues in more detail.