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Appointments to the board - Coggle Diagram
Appointments to the board
The code states that appointments to the board should be subject to a formal, rigorous and transparent procedure
Should be led by the nomination committee
Final decision will rest with the board
Both appointments and succession plans should be based on merit and objective cirtiera and should promote diversity of gender, social and ethnic backgrounds, congivitive and person strengths (intended to protect against discrimination for those with protected characteristics within the meaning of the Equalities Act 2010)
The Code states that open advertising and/or an external search consultancy should generally be used for the appointment of the chair and NED directors and that if an external search consultancy is engaged it should be identified in the annual report alongside a statement about any other connection it has with the company or individual directors
FRC Guidance states
Board appointments should be made on merit against objective criteria. The nomination committee should evaluate the skills, experience and knowledge on the board and the future challenges affecting the business and in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment. It should then agree the process to be undertaken to identify, sift and interview suitable candidates. It is important to build a proper assessment of values and expected behaviours into the recruitment process
Skills matrices which map the existing skillset against that required to execute strategy and meet future challenges can be na effective way of identifying skills gaps
Publicly advertising board appointments and working with recruitment consultants who have made a commitment to promote diversity are examples of ways in which the nomination committee can access a more diverse pool of candidates from which to appoint
Attention also needs to be paid to how the interview process is conducted so that candidates with diverse backgrounds are not disadvantaged
The nomination committee is also expected to use the results of the annual board evaluation to perform this task. Board evaluations are an opportunity for boards to review skills, assess their composition and agree plans for filling skill gaps and increasing diversity
Time commitments
When making new appointment, the board should take into account other demands on directors time. Prior to appointment, significant commitments should be disclosed with an indication of the time involved
Directors are expected to undertake that they will have sufficient time to meet what is expected of them effectively. The role of chair, in particular, is demanding and time-consuming, multiple roles are therefore not advisable. The nomination committee may wish to consider whether to set limits on the number and scale of other appointments it considers the chair and other non-executives may take on without compromising their effectiveness. This could help deal with shareholder concerns that some directors may have too many commitments
Additional external appointments should not be undertaken without prior approval of the board, with the reasons for permitting significant appointments explained in the annual report. Full time executive directors should not take on more than one NED in a FTSE 100 company or other significant appointment
Inspection of service contracts and terms of appointment
CA2006 requires directors service contracts to be made available by members at the company's registered office or single alternative inspection location
As NEDs do not have a service contract, the Code used to require their terms of appointment to be made available for inspection by any person at the company's registered office during normal business hours and at the AGM
FRC guidance still states that the terms and conditions of appointment of the chair and NEDs must be available for inspection