Role of the Nominating/Governance Committee

If the role of the board is to promote the best interests of a company, then the role of the nominating/governance committee is absolutely critical. The quality and commitment of directors are essential components to board performance. The fundamental responsibilities of the nominating/governance committee are:

• Identify individuals qualified to become board members and make appropriate recommendations at annual meetings. Conduct thorough background checks and due diligence on nominees. The committee should use gap analysis to assess the primary needs of the board and focus the recruitment effort on those needs. Hire a search firm when necessary to identify best possible candidates.
• Review qualifications and independence of existing board members and various committees and subsequently make recommendations as appropriate for any changes in the composition of the board and its committees.
• Keep abreast of any new and/or changing regulatory guidelines that would affect standards regarding independence of outside directors applicable to the company.
• Monitor the board and company’s compliance with any commitments or changes in governance practices.
• Lead the board in an annual review of the board’s performance.
• Review board compensation practices and work with compensation committee as appropriate.
• Author an annual report to shareholders.

The general makeup of the committee should consist of no less than three independent directors and should meet all of the requirements set forth by the New York Stock Exchange.Specific duties of the committee should include the following:

• Assess the adequacy and quality of information provided to the board prior to and during its meetings.
• Develop criteria and procedures for the identification and recruitment of candidates for election as directors including the range of skills and expertise needed.
• Consider issues involving potential conflicts of interest for such candidates.
• Consider nominees recommended by stockholder pursuant to company by-laws.
• Develop and implement procedures for the board’s periodic evaluation of its performance and effectiveness.
• Consider annually the establishment and membership of committees of the board, the delegation of authority to such committees, and the chairmanship of such committees including the periodic rotation of member and chair assignments.
• Evaluate management’s recommendations on the election of company officers.
• Periodically review the company’s corporate governance guidelines, issues related to corporate governance and recommend proposed changes.
• Conduct an annual performance evaluation of the committee.
• Review and reassess the adequacy of the committee charter on a regular basis and submit proposed revisions to the board.

With the myriad of recent scandals, the nominating/governance committee has a breakthrough opportunity to affect corporate America in a meaningful way. We recommend directors do not squander this opportunity and buckle under the old school pressures of autocratic CEOs.