MONEY MATTERS: The role of a board nominating committee

By Carol Gubb The Daily Record Newswire Numerous rules have been put into place by regulators since the enactment of the Sarbanes-Oxley Act (2002) and the passage of the Dodd-Frank Act (2010), including revisions to national stock exchange listing requirements. These rules, coupled with current proposals, are being designed to address the unease and unrest of shareholders and the public left by the global financial crisis and scandals. The onus has been thrust onto boards to ensure these rules are being followed to protect the future interest of organizations that they serve. The nominating committee is responsible for selecting appropriate and qualified board members. Independence continues to be emphasized and underscores the flurry of recent rule-making and legislation. Shareholders are becoming more vocal regarding board composition and are expressing discomfort with simply allowing company executives to continue to hand pick board members. This leads to determining what role the nominating committee should have. The nominating committee's primarily responsibility is to lead the company's efforts to identify and ensure suitable members serve on the company's board of directors. This may include developing selection criteria, assessing current board composition and dynamics, including skills and competencies. Anticipating current and future requirements including strategy, skills, relationships and experiences may also be required. The nominating committee ensures periodic evaluation of the board, screening potential candidates, makes hiring recommendations to the board, and provides orientation for the new board members. Board nominating committee guidelines generally encompass composition, independence and disclosure. Both the NYSE and NASDAQ require listed company nominating committees to be composed entirely of independent directors and governed by a written charter. The NYSE specifically indicates the charter address, the committee's purpose and responsibilities, which, at a minimum, must be to identify individuals qualified to become board members consistent with criteria approved by the board. The charter must also include that the purpose and responsibility of the committee is to select the director nominees for the next annual meeting of shareholders, develop and recommend to the board a set of corporate governance guidelines applicable to the corporation, and oversee the evaluation of the board and management. The charter is required to include an annual performance evaluation of the committee. Although many of us may not be involved with boards under regulation, the requirements and transparency enacted can be applied to local board involvement. Companies and not-for profits and their nominating committees or board members can look at existing policies and procedures for selecting board candidates and determine if clearly defined director qualifications requirements could be beneficial to the company or organization. Local board nominating committees can perform an analysis of current selection criteria compared to current and future position needs and align these with the company or organization's strategies and risk management process. Board members are of key importance to the governance of those companies and not-for profits in our community and the role of the nominating committee can ensure those companies and organizations continue into the future. ---------- Carol Gubb, CPA is a manager with Mengel, Metzger, Barr & Co. LLP and can be reached at Cgubb@mmb-co.com. Published: Thu, Apr 5, 2012