Composition, succession and evaluation Flashcards
What does Principle J say about appointments and success plans?
Appointments should be subject to a formal, rigorous and transparent procedure. An effective succession plan should be maintained for board and senior management. Both appointment and succession plans should be based on merit and objective criteria and should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strength
What does Principle K say about the composition of the board and its committees?
Board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the board as a whole and membership regularly refreshed.
What does Principle L say about evaluation of the board?
Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.
Who leads on appointments and succession planning?
Nomination Comm to lead appointments and succession planning for both board and senior management.
What is the composition of a nomination committee?
Majority of the members should be independent NEDs
Chair of the board should not chair the committee when it is dealing with the appointment of their successor
What does provision 18 say about annual re-election?
All directors should be subject to annual re-election. The board should set out in the papers accompanying the resolutions to elect each director the specific reasons why their contribution is, and
continues to be, important to the company’s long-term sustainable success.
Can a chair remain more than 9 years in post?
This can be extended to facilitate effective succession planning and the development of a diverse board and clear explanation is provided (provision not principle)
What methods should be used to recruit board members?
Open advertising and/or external search consultancy should be used for the appointment of the chair and NEDs. If an external search consultancy is engaged it should be identified in the AR
What does the code say on evaluation?
Formal and rigorous annual evaluation of the performance of the board, its committees, the chair and individual directors
In FTSE 350 companies – every 3 years
External evaluator should be identified in the annual report
Principle L - Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.
Who should act on the results of an evaluation?
Chair should act on the results of the evaluation by recognising the strengths and weaknesses of the board
Each director should engage with the process and take appropriate action when development needs have been identified
The annual report should describe the work of the nomination committee, including:
- 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 or will influence board composition;
- the policy on diversity and inclusion, its objectives and linkage to company strategy, how it has been implemented and progress on achieving the objectives; and
- the gender balance of those in the senior management and their direct reports.
