Nomination Committee(s)

In the past directors were often appointed on the basis of personal connections. This process
often did not provide the company with directors with appropriate business experience relevant to
the particular board to which they were appointed. The board would also not have a balance in as
much as there would be a lack of independent non-executive directors.

The Code (2014) advocates a formal, rigorous, and transparent procedure for the
appointment of new directors and states that 'there should be a nomination committee which should
lead the process for board appointments and make recommendations to the board. A majority of
members of the nomination committee should be independent non executive directors' (para. B.2.1).
The chair of the committee may be the chairman of the company or an independent non-executive
director but the chairman should not chair the nomination committee when it is dealing with the
appointment of a successor to the chairmanship. e would be a lack of independent non-executive
directors.
The nomination committee should evaluate the existing balance of skills, knowledge and
experience on the board, and utilize this when praparing a candidate profile for new appoinments. The
nomination committee should throw its net as wide as possible in the search for suitable candidates to
ensure that it identifies the best candidates, In an often rapidly changing business environment, the
nomination committee should also be involved with succession planning in the company noting
challenges that may arise and identifying possible gaps in skills and knowledge that would need to be
filled with new appoinments. As with the other key board committes, the members of the nomination
committee should be identified in the annual report.
It is important that the board has a balanced composition, both in terms of executive and non-
executive directors, and in terms of the experience , qualities and skills that individuals bring to the board.
Cadbury Report recommended that an audit committee and a remuneration committee should be
formed, and also stated that a nomination committee would be one possible way to make the board
appointments process more transparent. The Higgs Review (2003) reported that most listed companies
have an audit committee and a remuneration committee. Only one FTSE 100 company did not have an
audit commit tee or remuneration committee, whilst 15 per cent of companies outside the FTSE 350 did
not have an audit committee. Adoption of nomination committees has tended to be less prevalent with the
majority (71 per cent) of companies outside the FTSE 350 not having a nomina tion committee. FTSE
100 companies have tended to adopt nomination committees with the exception of six companies. The
Code (2014) states that there should be a nomination committee to lead the board appointments process
and make recommendations to the board.
The Institute of Directors (IoD) published some useful guidance in this area. Action list for
deciding board composition are extract from Standarts for the Board (2006) are detailed as below:
Role:
 1. Consider the ratio and number of executive and non-executive directors.
2. Consider the energy, experience, knowledge, skill and personal attributes of current an prospective
directors in relation to the future needs of the board as a whole, and develop specifications and
processes for new appoinments, as necessary.
3. Consider the cohesion, dynamic and diversity of the board and its relationship by the chairman.
4. Make and review succession plans for directors and the company secretary.
5. Where necessary , remove incompetent or unsuitable directors or the company secreatary,
taking relevant legal, contractual, ethical, and commercial matters into account
6. Agree proper procedures for electing a chairman and appointing the managing director and other
directors.
7. Identify potential candidates for the board , make selection and agree terms of appoinments and
renumeration. New appointments should be agreed by every board member.
8. Provide new board members with a comprehensive induction to board processes and policies,
inclusion to the company and to their new role.
9. Monitor and appraise each individual’s performance, behaviour, knowledge, effectiveness and
values rigorously and regularly.
10. Identify development needs and training opportunities for existing and potential directors and the
company secretary.

Definition
Based on POJK No 34/04/2014, article 1:
1. Nomination and Remuneration Committee is a committee formed by and responsible to the Board of
Commissioners in helping to carry out the functions and duties of the Board of Commissioners regarding
Nomination and Remuneration for members of the Board of Directors and members of the Board of
Commissioners.
2. Nominations are proposals for someone to be appointed as a member of the Board of Directors or a
member of the Board of Commissioners.
Characteristics
Article 3

Role and Responsibilities

Based on POJK 34/4/2014, article 8
The Nomination Committee has the task and answer at least:
a. related to the Nomination function:
1. provide recommendations to the Board of Commissioners regarding:
a. position composition of members of the Board of Directors and / or members of the Board of
Commissioners;
b. policies and criteria needed in the Nomination process; and
c. performance evaluation policy for members of the Board of Directors and / or members of the Board
of Commissioners;
2. assisting the Board of Commissioners in evaluating the performance of members of the Board of
Directors and / or members of the Board of Commissioners based on benchmarks that have been prepared
as evaluation material;
3. provide recommendations to the Board of Commissioners regarding capacity building programs for
members of the Board of Directors and / or members of the Board of Commissioners; and
4. To propose candidates who fulfill the requirements as members of the Board of Directors and / or
members of the Board of Commissioners to the Board of Commissioners to be submitted to the GMS.

Article 9
In carrying out the Nomination function as referred to in Article 8 letter a, the Nomination and
Remuneration Committee must carry out the following procedures:
a. compile the composition and nomination process of members of the Board of Directors and / or
members of the Board of Commissioners;
b. compile policies and criteria needed in the nomination process for prospective members of the Board
of Directors and / or members of the Board of Commissioners;
c. assisting in evaluating the performance of members of the Board of Directors and / or members of the
Board of Commissioners;
d. compile capacity building programs for members of the Board of Directors and / or members of the
Board of Commissioners; and
e. review and propose candidates who qualify as members of the Board of Directors and / or members of
the Board of Commissioners to the Board of Commissioners to be submitted to the GMS.

Article 19
1. The Nomination and Remuneration Committee must prepare binding guidelines for each
member of the Nomination and Remuneration Committee.

2. The Nomination and Remuneration Committee guidelines as referred to in paragraph (1)

must at least contain:

a. duties and responsibilities;

b. composition and structure of membership;
c. work procedures and procedures;
d. holding meetings;
e. activity reporting system;
f. procedures for replacing members; and
g. length of service.
3. The guidelines as referred to in paragraph (1) are stipulated by the Board of
Commissioners.

Responsibility:
The nomination committee is responsible for board recruitment and will conduct a continuous and
proactive process of planning and assessment, taking into account the company’s strategic priorities and
the main trends and factors affecting the long-term success and future viability of the company.
Appointing directors who are able to make a positive contribution is one of the key elements of board
effectiveness. Directors will be more likely to make good decisions and maximise the opportunities for
the company’s success if the right skillsets and a breadth of perspectives are present in the boardroom.
Non-executive directors should possess a range of critical skills of value to the board and relevant to the
challenges and opportunities facing the company.

Working with human resources, the nomination committee will need to take an active role in setting and
meeting diversity objectives and strategies for the company as a whole, and in monitoring the impact of
diversity initiatives. Examples of the type of actions the nomination committee could consider
encouraging include:
• a commitment to increasing the diversity of the board by setting stretching targets;13
• dedicated initiatives with clear objectives and targets; for example, in areas of the business that lack
diversity;
• a focus on middle management;
• mentoring and sponsorship schemes;
• a commitment to more diverse shortlists and interview panels; and
• positive action to encourage more movement of women into
non-traditional roles.
Diversity of personal attributes is equally important. The nomination committee will want to ensure the
board is comprised of individuals who display a range of softer skills, such as those in Figure 7

Questions for the nomination committee

• Have we assessed what skillset is required for the board and its committees?
• Do we reassess the make-up of the board as a result of emerging trends?
• Do we take account of the technical skills and knowledge required by the committees
when recruiting members?
• How often is a skills audit undertaken and are we keeping up with the pace of change?

1. Ensuring a formal and transparent board nomination and election process (OECD)
These Principles promote an active role for shareholders in the nomination and election of board
members. The board has an essential role to play in ensuring that this and other aspects of the nominations
and election process are respected.
First, while actual procedures for nomination may differ among countries, the board or a nomination
committee has a special responsibility to make sure that established procedures are transparent and
respected. Second, the board has a key role in defining the general or individual profile of board members
that the company may need at any given. time, considering the appropriate knowledge, competencies and
expertise to complement the existing skills of the board. Third, the board or nomination committee has
the responsibility to identify potential candidates to meet desired profiles and propose them to
shareholders, and/or consider those candidates advanced by shareholders with the right to make
nominations. There are increasing calls for open search processes extending to a broad range of people.

Working with human resources, the nomination committee will need to take an active role in setting and
meeting diversity objectives and strategies for the company as a whole, and in monitoring the impact of
diversity initiatives. Examples of the type of actions the nomination committee could consider
encouraging include:
• a commitment to increasing the diversity of the board by setting stretching targets; 13
• dedicated initiatives with clear objectives and targets; for example, in areas of the business that lack
diversity;
• a focus on middle management;
• mentoring and sponsorship schemes;
• a commitment to more diverse shortlists and interview panels; and
• positive action to encourage more movement of women into non-traditional roles.

a commitment to more diverse shortlists and interview panels; and

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

Succession plans should consider the following different time horizons:

• contingency planning – for sudden and unforeseen departures;
• medium-term planning – the orderly replacement of current board members and senior
executives (e.g. retirement); and
• long-term planning – the relationship between the delivery of the company strategy and
objectives to the skills needed on the board now and in the future.