Director nominations and elections represent some of the most fundamental ownership rights for shareholders – namely the right to appoint and remove members of a company board to represent their interests in promoting long-term value creation.
Shareholders can – and should – become involved not only in voting for director candidates at Annual General Meetings (AGMs), but also in engaging with companies to ensure that nominees are best-suited to guide the long-term success of the company.
An ineffective nominations process brings with it major risks, including ineffective board members or whole boards that are not fit for purpose. To have a clearer understanding about how companies are managing this process, investors should engage them on:
- the role of the nominating panel;
- existing board composition and processes to review directors’ performance;
- succession planning;
- the skills, experience and qualifications of nominees.
A lack of disclosure and engagement offers little indication about whether the company follows a robust process to place candidates or how nominees can best serve the company. This demonstrates the case for active investor involvement in the director nomination processes.
A lack of disclosure and engagement offers little indication about whether the company follows a robust process to place candidates or how nominees can best serve the company.
This report shares the lessons learnt and best practices seen from engagement dialogue between companies and investors on the nominations process in the US and France. It also provides an overview of these two markets including, challenges and suggestions to improve the quality of and reporting on companies’ nominations for the board.