Our Nomination Committees’ terms of reference include the following two clauses:
“To consider plans and make recommendations to the Board for orderly succession for appointments to the Board AND TO SENIOR MANAGEMENT, to maintain an appropriate balance of skills and experience within the Company and on the Board and to ensure progressive refreshing of the Board, taking into account the challenges and opportunities facing the Company and its subsidiary undertakings (the Group).”
“To keep the executive and non-executive leadership needs OF THE GROUP under review, with a view to ensuring it continues to compete effectively in the marketplace.”
At the first meeting of the NomCo the Chairman said that was the responsibility of the Exec management team and requested that this reference be removed from the ToR.
In other companies I have worked with, the “pipeline” of existing management talent, and their development potential to a board position, has been monitored/reviewed by NomCo on a regular basis (as well as during the Board’s annual strategic review).
Is the exclusion of senior management development/monitoring, the “norm” within other NomCos?
Executive and board succession planning is within remit of our Nomination Committee but in practice the whole Board reviews executive succession planning across all Group functions. It is on the schedule of Board events on a semi-annual basis.
A Supporting Principle to UKCGC Principle B.2 says
“The board should satisfy itself that plans are in place for orderly succession for appointments
to the board and to senior management, so as to maintain an appropriate balance of skills
and experience within the company and on the board and to ensure progressive refreshing
of the board”
I interpret this as meaning that the Board (through the Nom Com) has to be satisfied that “plans are in place” for senior management succession. Whether the Nom Com puts those plans in place itself directly, or lets the exec directors deal with the detail, and just has oversight of what the exec directors are doing, is a matter for the Nom Com. But one way or the other, the Nom Com should be involved in senior management succession planning. My company’s Nom Com adopts the latter approach – the CEO deals with the detail of succession planning for senior executives, but he reports to the Nom Com periodically on those plans.
In our company, it is the board’s responsibility to ensure adequate succession planning for the board and senior management.
It is the responsibility of the Nomination Committee to “keep under review the leadership needs of the organisation.” This wording is reflected in the Committee’s terms of reference, modelled on the ICSA guidance, which refers to the committee carrying out duties for the parent company, major subsidiary undertakings and the group as a whole, as appropriate.
The task is taken seriously with one committee meeting a year devoted to reviewing the “pipeline” of existing management talent, as presented by the executive.
Our NomCo is very focussed on succession planning for the Board but also for the executive pipeline. They make all recommendations in respect of the Board positions but have full sight of executive succession plans. Actual approval of any Executive appointments rests with Management, rather than with the Board.
Succession planning is a key area of focus for our NomCom, and that includes Board, senior executives and executive positions. It’s reflected in the terms of reference and it happens in real life!
Our NomCo only looks at Board succession. The Board looks at general Executive Succession.