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The Alchemy of Leadership Blog

The Cinderella of Corporate Governance

Over the last two decades there has been a host of reports into the governance of UK quoted plcs.  The process was kicked off with the Cadbury Report in 1992, put in place following the Maxwell, Polly Peck and BCCI scandals.  This has been followed by (amongst others) the Greenbury Report, the Hampel Report, the Higgs Report, the Myners Report and, for banks, the Walker Review.  These august bodies have made many valuable recommendations about board governance, the role of the chairman, the composition of the board, the remit of the remuneration committee, the leadership of the audit committee, and so on.  Oftentimes these recommendations met resistance at first before being accepted and implemented.  Today they mostly seem sensible, part of the landscape.  There is pragmatic flexibility too: under the “comply or explain” doctrine, companies can deviate where they consider it sensible.

In all of this activity, however, very little attention has been paid to the Nominations Committee.  It’s the Cinderella of board governance.  Executive pay, the domain of the Remuneration Committee, gets vast and strident coverage in the press.  Accounting problems, fraud, bribes, etc are – rightly – seen as extreme examples of governance failure and so the Audit Committee needs to be on its mettle.  But the NomCom does its work in the background, quietly getting on with its vital role of ensuring that the Board and senior management are fit for purpose.  Doesn’t this seem a bit odd?  After all, what could be more important to the success of the business than picking the Chairman and CEO?  Perhaps ensuring that the senior leadership pipeline is strong?  Or making sure the Board has the skills needed to hold management to account?  These are also generally the job of the NomCom, of course, yet it receives far less attention than its more public cousins.  Time to reconsider Cinderella’s place in the corporate governance firmament?

Cinderella

© Patrick Macdonald 2015

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