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Policy: Out of the shadows

06 June 2016

Policy: Out of the shadows - read more

The nomination committee is finally being recognised, says Peter Swabey

Our research on the role of the nomination committee, undertaken in association with EY, was launched on 6 May. The key finding of the report ‘The nomination committee: coming out of the shadows’ is that this committee is no longer thinking purely about upcoming board changes, but is now looking more deeply into the organisation − casting the net wider and thinking further ahead to identify and nurture top talent.

The report sets out recommendations for boards and their nomination committees, including: looking across the market to identify four or five potential successors to the CEO; having open conversations about future career plans to sequence board succession; and challenging head-hunters to look beyond the ‘usual suspects’.

We also launched our latest Bellwether survey on 23 May – you can read the highlights on page 56. The findings about Brexit have probably attracted most attention, notably that boards are not overly concerned about a possible exit from the EU and are not persuaded that they need to engage in the debate.

Perhaps more disturbing is that still not even half of FTSE 350 boards (49%) have assessed the risks and/or planned for a possible exit, although this is up from 26% in December 2015.

One area that particularly interested me was succession planning, which chimed very well with the results from the nomination committee research. The results suggest the increased professionalisation of the nomination committee through improved confidence that the executive pipeline will be sufficient for the future of the company – up to 58% from 35% in December.

How sufficient is your company’s total executive pipeline?

However, most nomination committees are not responsible for overseeing talent development throughout the company, with only 36% of respondents saying that they are. This means that, in the majority of cases, talent management other than immediately below board-level is the responsibility of management.

I was also struck by responses to our question about what companies are doing to improve public trust. Most responses linked issues such as transparency and improved disclosure to building public trust, however, these are standard reporting requirements for a specialist and informed audience.

Others emphasised their CSR activity and community engagement. Only a few linked wider communication of their brand values as an explicit means of building public trust and just one explained how they attempted to demonstrate their values to their suppliers and customers.

These results do suggest a somewhat formulaic approach and a lack of real engagement by boards with stakeholders other than investors. If we are to see a significant increase in public trust in business, which is surely in the interests of the long-term success of the company, more thought needs to be given to how public trust can be regained. We believe that demonstrating positive culture and ethics − and avoiding further embarrassing scandals − are key to this.

If you would like to discuss any of the subjects covered in this column in more detail, please contact the policy team at policy@icsa.org.uk.

ICSA’s research with EY and the latest FT–ICSA Boardroom Bellwether survey can be found on the ICSA website in the Research section.

Peter Swabey is Policy and Research Director at ICSA: The Governance Institute

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