The New, Improved Nominating Committee
BY Ralph Ward
The corporate board's nominating committee has always been a bit of an afterthought, meeting maybe once a year to discuss whether anyone knew someone who could take Old Fred's place on the board since he was about to retire. And that's assuming the board even bothered to have a nominating committee. But the new, improved nominating committee is turning into a powerful oversight tool for the all the new governance demands faced by corporate boards.
J. Richard, a California-based board consultant, told me of some changes he's seeing in nominations. Among them:
At a lot of corporations, nominations is evolving into an overall directors and governance committee. It can then do everything from selecting directors, to evaluating them, to setting their pay, to naming committee chairs. It can also set governance procedures for the board, which has become one of the hottest demands.
Turning your nominating committee into a governance committee is a natural move -- it can dovetail board search, evaluation, and board info programs into a rational process that finds the best people, uses them well, and grades the results.
On progressive boards, the committee also taps lots of outside talent, like evaluation consultants and search firms. The latter are important because this new committee casts a much broader net for board talent. "This committee is open to recommendations from anyone" notes Richard. "They know they have to work with a search firm, and they're not afraid to accept board nominations from investors."
The logistics of this new committee are tougher, though. First, you should direct your best boardroom talent toward it. ("I've found that, on average, 75 percent of outside directors are good, and the other 25 percent are expendable, either sleeping, missing meetings, or out of their depth" says Richard.) Your three best outsiders would work well (not your CEO, however), though work demands may "push membership to four or even five." No "once a year" stuff, either -- this committee meets four times a year, with plenty of telephone time in between.
Leadership? A natural chair for your new governance committee is the board's lead director, either formal or informal. Having a leader with such gravity also makes clear how important this committee's job is.