The Nomination Committee: Definition, Challenges, Best Practices

According to PwC, only 29% of executives are satisfied with overall board performance, while 89% want to replace at least one board member. It highlights the importance of a quality nominations committee that aligns board qualifications with business strategies.

This article explores the purpose, composition, and best industry practices for nomination committees across corporate and nonprofit boards. Keep reading to discover the solutions to five nomination challenges and three case studies for the nominating committee’s best practices.

What is a nominating committee?

The nomination committee is the board of directors subcommittee responsible for selecting, evaluating, and nominating board members and senior management positions. The nomination committee is the cornerstone of corporate governance and board succession planning.

What does a nominating committee do? Its primary role is to define the skills and experiences required for successful board governance. The nomination committee ensures the candidates align with the organization’s mission and proposes in the following ways:

• Mission alignment screening. It has a deep understanding of the company’s strategy and mission. Its members carefully screen candidates for the company’s mission alignment.
• Skill assessments. It conducts in-depth skill assessments of potential candidates to ensure their experiences, qualifications, and backgrounds contribute to the organization’s long-term well-being.
• Succession planning. The nomination committee develops board composition recommendations and succession plans. It ensures candidates fit the succession planning strategy and support business continuity.

Legal and regulatory requirements for nomination committees vary for corporate and nonprofit boards. Businesses in the United States should consider the Securities and Exchange Commission (SEC).

Companies must disclose nomination committee composition, record meeting frequency and minutes, and committee functions. Businesses must also disclose nominating decisions driven by security holders.

Check legal requirements about meeting minutes in our definitive guide.

Businesses should also review the Sarbanes-Oxley Act (SOX) for the best board independence and governance practices. In the nonprofit sector, organizations must meet board composition and corporate governance principles by the Internal Revenue Service. You should also consider legal board size requirements from SOX, the Securities Exchange Act of 1943.

What is the ideal composition of the nominating committee?

The nomination committee should consist of the board chair (who is also a committee chair), non-executive directors (NEDS) and senior independent directors (SIDs). As per size, it depends on the total number of board members. American boards have 11 directors on average (Spencer Stuart). Globally, boards have ten directors on average.

Meanwhile, the Corporate Governance Center says 93% of nominating and remuneration committees worldwide have fewer than five members, while 56% have three to five directors.

As for independent directors, regulatory bodies highlight their importance. The SEC insists that SIDs must comprise the majority of boards in investment companies. Globally, boards consist of 64% independent directors (Spencer Stuart). 

Diversity also plays a role, and 88% of directors surveyed by PwC say it improves board performance. As per the diversity ratio, women and underrepresented groups comprise 42% of the U.S. board directors.

Given the numbers, the ideal nomination committee composition is 30% – 50% of the total board size, with 60% independent and 40% diverse directors.

4 best practices for selecting candidates

Below, you can see the four best practices for selecting nomination committee candidates:

1. Emphasize decision-making experience. Nomination directors should balance multiple perspectives while making decisions. Experienced CEOs, entrepreneurs, founders, and government experts may be suitable candidates. 
2. Evaluate interpersonal skills. Consider candidates with solid recruitment experience and diplomatic skills. It helps them seek a compromise, adjust communication styles, and adapt to interpersonal dynamics.
3. Consider financial skills. It’s advisable to search for nomination committee candidates with sufficient experience in mergers and acquisitions, restructuring, and divestitures. Strong financial skills will help them select qualified board directors.
4. Consider cybersecurity expertise. Up to 90% of Russell 3000 companies have zero directors with sufficient cybersecurity expertise to mitigate current digital challenges. Therefore, closing the digital gap is crucial, even if relevant candidates may be first-time directors.

6 key nominating committee duties

The nomination committee aligns board directors with the company’s mission, values, and strategic objectives. The nominating committee responsibilities (typically outlined in the charter for a committee) are the following:

1. Evaluate the board’s competence. It evaluates current director skills and identifies qualification gaps and opportunities to benefit the company’s strategic goals. The committee develops recruitment plans based on annual board evaluations.
2. Recruit candidates. It searches, screens, interviews, and recruits candidates to fill the qualification gaps and strengthen the board’s collective capabilities.
3. Manage onboarding processes. It ensures new board members understand their roles and responsibilities and successfully mesh with other board directors.
4. Manage board succession. It ensures the seamless transition of board directors, manages director tenures, develops deputy chair and executive recruitment plans, collaborates with the board development committee, and continuously updates skill matrices.
5. Assess board performance. It facilitates self-evaluations, peer assessments, interviews, and other board assessment practices at a regularly scheduled board meeting.
6. Cooperate with the board. The nomination committee continuously consults and collaborates with the audit committee, the remuneration committee, and other subdivisions to align candidate compensations, skills requirements, and backgrounds.

Process of nomination by a nominating committee: 8 key steps

The nomination process may be complex. It typically takes three months to nominate a board director. It can also take four to five months to fill the Chief Executive Officer position. Let’s describe the nomination cycle step by step: 

1. Preliminary board assessment. Review the board’s strengths and weaknesses, assess director skills, and align recruitment suggestions with the governance committee and the executive committee.
2. Stakeholder survey. Interview stakeholders to understand their vision of the board company performance and consider their recommendations for director candidates.
3. Candidate profile development. Create a desired candidate profile based on board assessments. Discuss the candidate’s compensation with the remuneration and fundraising committee. Develop a detailed job description.
4. Active recruitment. Distribute the job description across various channels, including job boards, social media, and personal networks. Gather candidate applications.
5. Candidate screening. Review candidates’ applications & CVs against established criteria. Verify candidates’ backgrounds.
6. Interviewing. Interview board candidates during the committee meeting and arrange interviews with the executive committee and other relevant subdivisions. Evaluate candidates’ qualifications, communication skills, and understanding of your organization’s mission.
7. Board negotiation. Decide whether the candidate fits the board position. Gather input from stakeholders and board members. 
8. Candidate negotiation. Negotiate the compensation and tenure with the candidate. Proceed to the onboarding process once the candidate accepts the offer.

Tip: Check page 609 of Robert’s Rules of Order for more insights on the nomination process.

Top 5 challenges the nomination committee faces

The nomination committees face several challenges, including but not limited to the following:

1. Limited time. Non-management directors often have tight schedules due to heavy workloads. Thus, directors at Europe’s largest financial firms have an average of three seats. It often steals time from quality candidate evaluations.
2. Data overload. Directors receive dozens of applications. Sometimes, they can’t efficiently organize and analyze recruitment data. Lack of time and limited technology use are among the top factors.
3. Communication silos. Competing priorities make it difficult for the board nominating committee to coordinate its work with other committees. These factors may interfere with the nominating process.
4. Conflict of interest. Conflict of interest may interfere with objective candidate assessments. It may cause certain board members to slow the process and harm the organization.
5. Regulatory challenges. The nomination committee members should carefully consider regulatory requirements while selecting candidates. It may be challenging to overcome between the organization’s true needs and regulatory demands.

3 strategies to solve the main nomination committee challenges

Here are the best solutions to tackle nomination committee challenges:

1. Leverage the right digital technology. Dedicated project management software reduces administrative work, promotes remote collaboration, and helps with data analyses. 
2. Involve regulators. Directors with regulatory experience help boards navigate legal complexities and professionally address related nomination issues.
3. Promote conflict disclosure policies. While not 100% proof of conflict of interest, disclosure policies help committee members detect related issues faster.

Nominating committee best practices: Case studies

Implementing best industry practices regarding transparency, diversity, and quality nominating process ensures business excellence. You can check the nominating committee’s best practices and case studies below.

Nominating transparency

Corporate, nonprofit, and institutional boards should be transparent about the nomination process, including selection criteria, voting specifics, considerations, and overall approach. Here are the best practices that align with existing disclosure regulations:

• Ensure shareholders and stakeholders have 24/7 public access to nomination committee policies and procedures.
• Describe the nomination committee’s composition, responsibilities, approaches, and policies on the dedicated web page or within governance documentation.
• Ensure that the audiences not familiar with legal jargon or without in-depth business experience understand nomination committee policies and procedures.

Microsoft’s approach described in its Corporate Governance Guidelines embodies the best transparency practices:

1. The document is publicly available on the dedicated page.
2. The document describes the nomination approach and delves into candidate criteria and board performance practices.
3. Although the document has a ~22 Flesch readability index (low), it avoids complex legal terms. Individuals with college degrees can understand it easily.

Diversity and inclusion

Companies, organizations, and institutions can promote a culture of understanding, quality, diversity, and inclusion with the following best practices:

• Treat inclusion as part of the culture rather than a compliance exercise.
• Include diversity and inclusion statements in the nominating committee guidelines.
• Ensure diversity within the nomination committee and the board of directors.
• Include nondiscriminatory devotions in the board charter.

The American Academy of Actuaries incorporates some of the best inclusion practices interconnected across its committees and integrated within its governance guidelines:

1. It refreshes its board composition regularly and publicly declares its directors’ departure terms (under profile pictures).
2. It reinforces diversity and inclusion within its equal opportunity policy, mission statement, and nomination committee guidelines.
3. Its board of directors represents diversity in age, race, gender, personal appearance, background, and other features.

Robust nomination process

Here are the best practices to ensure a quality nomination process:

• Standardize the requirements for the nominating committee functions and composition.
• Provide guidelines and requirements tailored to specific roles in the nominating committee charter.
• Have clear protocols outlining the nomination sequence for each position.

The Canadian Medical Association exemplifies several efficient nomination practices:

1. Its nominating committee members represent Canadian provinces, affiliate societies, residents, and students. Only medical professionals who are Canadian residents are eligible to be members of the Association.
2. It differentiates nomination procedures and requirements for different positions, such as the student director, non-physician director, provincial director, and positions elected by the General Council.
3. It clearly defines the primary duties of nominating committee and describes step-by-step nomination protocols for different positions.

The evolving role of nominating committee in the business and societal landscape

The nominating committee within non-profit, corporate, and institutional boards play the following roles in business and societal landscapes:

• Innovation driver. Nomination committees respond to business challenges by selecting board directors with innovative perspectives and experiences matching current market trends, such as AI, digitalization, and cybersecurity.
• Environmental influence. Nomination committees shape environmental trends by selecting executives with ESG experiences.
• Geopolitical influence. Corporate, nonprofit, and institutional boards contribute to the international community. Candidates willing to reduce multinational tension would be beneficial to global peace.

Nomination committees may take the following steps in the next few years:

1. Balance ESG and sustainability. Nominating committees will readjust board compositions to address ESG’s impact on supply chains, customers, and long-term business sustainability.
2. Evaluate risks more diligently. Nominating committees will consider disruptive technologies, such as generative AI, political tension, and global risks. Cybersecurity and national security will become critical.
3. Strengthen decision-making. Rising challenges will require diverse perspectives, flexibility, and willingness for discussion. These qualities, as well as relevant skills and capabilities, will become top priorities in nominating plans.

How does board management software help nominating committees?

As much as 89% of board directors say digital strategies go hand in hand with business growth. Moreover, directors consider software enhancements and data management tools, such as board management software, the top three contributors to business success. Thus, board portals enhance nomination committee capabilities with the following:

1. Tools for board meetings. Interactive agenda builders, meeting minute trackers, and data-sharing capabilities help committees process candidate applications and conduct interviews.
2. Collaboration tools. Board portals have built-in voting tools, action items, board packs, and messaging tools to facilitate cross-committee collaboration.
3. Activity dashboards. Directors use activity dashboards to track candidate recruitment processes. Board members create activity reports, enhancing compliance and transparency.
4. Robust data protection. Leading board portals use an encrypted connection and granular access permissions, helping nominating committees retain data security compliance while working with candidates.

You can compare top board portal providers on our website and choose one that matches your requirements.

The bottom line

1. The ideal nomination committee composition should be 30% – 50% of the board size, and over 60% and 40% of directors should be independent and diverse, respectively.
2. Clearly define the nomination process requirements, such as candidate eligibility, recruitment time frames, and nomination committee responsibilities.
3. Adopt the best practices, such as public disclosure, inclusion culture, and clear nomination protocols for various roles.

FAQ

How many members should be on a nomination committee?

The nomination committee size should be 30% – 50% of the total board size or 3-5 directors based on worldwide board size data.

Who appoints the nomination committee?

The board of directors has the collective authority to appoint the nomination committee. The board chairs may solely appoint the nominating committee in non-profit boards with less formal structures (in small organizations).

Who should be on a nominating committee?

The nominations committee consists of the board chair, senior independent directors (SIDs), and non-executive directors (NEDS). Ideally, independent directors comprise 60%+ of the nomination committee.

How can technology assist nomination committees in their processes?

Board management software reduces administrative burden, improves cross-committee collaboration, accelerates candidate reviews, and ensures data security. You can choose from the top 10 board portals to strengthen your nomination committee.