NOMINATING COMMITTEE - MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012 - Part 1

The following, a commentary, is provided for Recommendation 2.1 to 2.3 and 3.1 to 3.5 of MCCG 2012. The commentaries seek to explain and provide some guidance for the recommendations. 

PRINCIPLE 2: STRENGTHEN COMPOSITION

The board should have transparent policies and procedures that will assist in the selection of board members. The board should comprise members who bring value to board deliberations.

Recommendation 2.1

The board should establish a Nominating Committee which should comprise exclusively of non-executive directors, a majority of whom must be independent.

Commentary

The Nominating Committee is charged with the responsibility to oversee the selection and assessment of directors.

An effective Nominating Committee will contribute towards ensuring that board composition meets the needs of the company. The chair of the Nominating Committee should be the senior independent director identified by the board.

Recommendation 2.2

The Nominating Committee should develop, maintain and review the criteria to be used in the recruitment process and annual assessment of directors.

Commentary

The Nominating Committee’s responsibilities include assessing and recommending to the board the candidature of directors, appointment of directors to board committees, review of board’s succession plans and training programmes for the board. In assessing suitability of candidates, considerations should be given to the competencies, commitment, contribution and performance. The Nominating Committee should facilitate board induction and training programmes. The nomination and election process of board members should be disclosed in the annual report.

The board should establish a policy formalising its approach to boardroom diversity. The board through its Nominating Committee should take steps to ensure that women candidates are sought as part of its recruitment exercise. The board should explicitly disclose in the annual report its gender diversity policies and targets and the measures taken to meet those targets.

Recommendation 2.3

The board should establish formal and transparent remuneration policies and procedures to attract and retain directors.

Commentary

Fair remuneration is critical to attract, retain and motivate directors. The remuneration package should be aligned with the business strategy and long-term objectives of the company. Remuneration of the board should reflect the board’s responsibilities, expertise and complexity of the company’s activities.

The board should establish a Remuneration Committee to perform this function. The Remuneration Committee should consist exclusively or a majority of, non-executive directors, drawing advice from experts, if necessary. Companies without a Remuneration Committee should have board policies and procedures on matters that would otherwise be dealt with by the Remuneration Committee. Board remuneration policies and procedures should be disclosed in the annual report.

Continued ...