By: Sandi Verrecchia
CEO Satori Consulting Inc.

In the complex world of corporate governance, where decisions impact stakeholders at every level, the Board Nominating Committee plays a pivotal role in shaping the future of a company by selecting and nominating individuals who will lead and guide its strategic direction. In this blog, we delve into the significance of the Board Nominating Committee and the key responsibilities it holds in ensuring effective corporate oversight.

The Role of the Nominating Committee: 

The Board Nominating Committee, which is often a sub-committee of the Governance Committee, primary function is to identify, evaluate, and recommend qualified individuals for board positions. The committee, while very active during election cycles, also works yearlong identifying interested people to shore up an active evergreen list, so when Board positions become available or when current Board member terms are up for potential renewal, they have a seed list in which to begin to engage. In addition to grassroots and traditional recruiting practices, many nominating committees have also taken to social media to widen the search and capture potential candidates that may be outside the circle of the influence of either the committee or the Board as a whole.

The Challenge: 

The challenge faced by every Nominating Committee is to answer the following question:

Is it in the best interest of the organization to simply renew a term of an existing Board member or might it be in the best interest of the organization to replace an individual with a new Board member that has the skills and competencies that better align with a current or future skill or competency needs? 

The key in the above question lies in the phrase “in the best interest of the organization”. This means that it is the fiduciary duty of the Nominating Committee to bring forward a recommendation that is in the best interest of the organization. This is not an easy task. Let’s assume that the Board member or members who are up for re-election have performed their duties adequately over their term and they are well respected at the Board table, but the Nominating Committee has identified a strong skill gap based on the strategic direction of the organization, and the incumbent or incumbents do not possess this skill yet within the pool of potential candidates the skill is strong.  What should the Nominating Committee do? There are risks in not recommending renewal: 

  • The Committee runs the risk of upsetting the Board member if they are not recommended to renew their term.  
  • The Committee runs the risk of upsetting the Board dynamics by recommending an unknown factor into a potentially steady Board, and if the Board is community based, they may face reputational risk.  

However, understanding their fiduciary duty, if they do recommend renewal, they run the risk of not fulling their fiduciary duty and as important, they run the risk of not having a skill set at the table that is necessary for the future growth and prosperity of the organization. The role of the Nominating Committee can be challenging indeed.  

Two Scenarios: 

The nominating committee is often faced with two scenarios.  

  • One scenario is filling a Board seat that is vacant due to a resignation or a term that has expired.  
  • The second scenario is reviewing current Board members who are up for re-election.  

In both scenarios the Nominating Committee should be assessing the Board as a whole and determining current and future needs of the Board. This means that the committee must assess if there are any skill, competency, experience or diversity gaps. While this probably sounds logical, many committees put a great deal of time and effort in finding great candidates to put forward for vacant positions, but fewer really take a critical look at the needs of the organization in relation to the existing Board members who are up for renewal.  

At Satori, we like to remind Board members that being on a Board is not a right and being up for renewal of a term does not imply automatic success.  

Two issues typically get in the way of Nominating Committees taking a futurist view of the organizational needs.  

  • The first is bias. Whether the biases are conscious or unconscious, personal biases toward existing Board members can get in the way of making tough decisions.  
  • The second challenge is the fear of engaging in what may be a very difficult conversation.  

Whether the conversation is at the Board table recommending that a fellow Board member not be put forward for re-election or, even more difficult, is the potentially tough conversation that will happen with the Board member. These conversations can be exceedingly difficult and are often avoided by simply recommending incumbents to renew a term. However, the leadership expectations at the Board table should not be different than the expectations put on the leadership of the organization and, as such, while difficult these conversations need to be had.   

6 Steps to a Successful Decision and Conversation  

Socialize the understanding that a Board seat is not a right or a given.

  • Ensure everyone knows that, when up for renewal, a fulsome review will be taken to determine the current and future needs of the organization and the Boards fiduciary obligation to the organization.

Conduct a thorough, non-biased needs assessment.

  • Conduct a skills and competency assessment of existing Board members and assess the current and future skills and competency needs of the Board to meet its strategic plan. Clearly articulate what skills and competencies the Board requires for success.

Take an arm’s length approach.

  • Consider placing a non-voting outside member on the Nominating Committee to help facilitate the discussions.
  • Take a critical look at the renewing Board members as well as known vacancies that will take place in the short term.
  • Post for renewing terms focusing the on the skills and competencies required for success.
  • Create a formal decision-making model.

Conduct a formal interview process.

  • Conduct a skills assessment on potential candidates.
  • Put rigor around a formal interview process with questions that dig into the identified skills and competencies as well as core values and ethics.
  • Use a scoring system to treat each candidate, whether an incumbent or new applicant, the same.

Think longer-term.

  • Be courageous and put forward recommendations that serve the future best interest of the organization thinking about succession planning which is critical for the long-term sustainability and resilience of an organization.
  • Prepare for the conversation.
  • Write down what needs to be said.
  • Provide the facts while not minimizing the Board member’s contribution and leave space for the person to react.
  • Reiterate that the decision is not personal but rather the committee is fulfilling its duty, and it is in the best interest of the organization.

Conclusion: 

In the complex and dynamic world of corporate governance, the Board Nominating Committee stands as a guardian of leadership quality and diversity. Its role is not easy and tests human fortitude to do the right thing vs. the easy thing. But, if done right, can send a powerful message throughout the organization that the Board, in its leadership and stewardship capacity of the organization, always puts the organization first. A formal recruitment process demonstrates accountability and decision making that extends beyond the recruitment of directors; it demonstrates strategic planning, risk management, and the fostering of a culture that embraces diversity.  

Satori Consulting’s comprehensive services in governance assessment, Board development and training, empowers Boards to fulfill their responsibilities and maximize organizational performance. Embrace the power of effective Board governance with Satori Consulting and unlock the full potential of your organization. Contact us today for a free consultation.