Subodh Kharel

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A committee that acts under the corporate governance area of an organization. It is focused on evaluating the board of directors of its respective firm and on examining the skills and characteristics that are needed in board candidates. It may also have other duties, which vary from company to company.

The committee is also involved in reviewing and changing corporate governance policies. The committee is often comprised of the chairman of the board, the deputy chairman, and the chief executive officer. The exact number of members on each committee tends to differ depending on the organization.

Principle 2: Nomination committee

A nomination committee with a written mandate and terms of reference consistent with good practice may ensure the selection of directors and a chief executive officer (CEO) of the highest caliber. Comprising mainly of independent directors, the committee should have a written definition of independence, inclusive of both subjective and objective criteria.

The effectiveness of a nomination committee can be enhanced with a written mandate listing its responsibilities. The primary duties of the Nomination Committee are to review the structure, size and composition of the Board, identify individuals suitably qualified to become members of the Board, and assess the independence of independent non-executive directors.

The main roles are: (i) Engage the most competent directors and a CEO by adopting a process designed to produce the desired result without bias. If necessary, the committee should employ an external search firm. (ii) Be responsible for succession planning.

(iii) Make recommendations to the board on the appointment and term of directors and senior executives bearing in mind the need for a balance of skills on the board. Ultimately, directors should be elected by shareholders.

(iv) Define independence including both subjective and objective criteria and monitor director independence on a regular basis. The totality of circumstances should be considered in determining whether a board member is independent. Those who have relationships that might interfere with the exercise of independent judgment should be excluded.

(v) Institute a process for monitoring director performance. Regular performance reviews of directors and of the board as a whole should be made, with independent directors meeting at least once annually in the absence of other directors. Director performance should be judged relative to the goals of the enterprise on issues they are directly responsible for.

(vi) Oversee the preparation of annual disclosure statements that directors are required to make.