Director nomination process: Discussion paper - Part 1

Overall findings of the SC in relation to engaging with companies on the topic and markets’ good practices are shared in this document which is co-authored by SC members and corporate governance expert, George Dallas. Its purpose is to promote a greater understanding of director nominations as a critical part of corporate governance, as well as to provide investors with a basic framework to undertake meaningful company engagement on this theme.

Chapter 1 provides a short overview of how board quality can be affected by director nominations and elections, and offers a summary of good practice in promoting board accountability, effectiveness and transparency – the three main pillars of a robust nomination process.

Chapter 2 summarises the research undertaken by the SC on the director nominations process in the seven selected regions, all of which have differing legal traditions and ownership structures. By examining these country studies, investors can not only begin to frame and understand best practice of director nominations in the specific markets under review, but also identify what might be expected of other companies in a broad range of jurisdictions. The full research of each market, including a market overview, company case study and identified good practice recommendations is included in part 2.

Chapter 3 focuses on the role of investors in engaging on director nominations. Voting in director elections can be routine but scope and responsibility does exist which allows shareholders to exert greater influence over the characteristics of candidates put forward for election as directors. Companies with performance which suggest insufficient director attention to investor interests, or ineffective oversight of strategy and risk, would be most likely to benefit from improvements in this regard. This chapter therefore considers investor challenges in engaging with companies on this issue, and how these challenges can be addressed.

In an effort to further assist investors in their engagement on the nomination process, Chapter 4 identifies a series of possible questions (illustrating the three main pillars and associated core issues) investors may wish to draw from and customise for their own use. Finally, Chapter 5 offers some brief conclusions.