There are important advantages to a shareholder/stakeholder-based nominating committee:
- It ensures that the shareholders as a whole elect directors from a list of nominees with the societal, industry and other essential expertise and contacts, desired not only by the owners, but also by other critical stakeholders.
- It requires only a limited time commitment (to the nominating committee) from high-powered stakeholders.
- It breaks the monopoly of power that develops on boards and nominating committees dominated by a CEO/Executive Chairman.
- It increases the chances of getting strong sparring partners onto the board, because the directors owe their loyalty, not to the CEO/Chairman, but to the stakeholder representatives on the nominating committee.
A shareholder/stakeholder-based nominating committee would need specific rules of committee governance to integrate the different perspectives on desirable nominees. Moreover, the increased diversity on the board would complicate the life of the chair in getting the board to work together. However, the board does not have a management role; it does not have to be an integrated team. It has to perform the conflicting roles of both supporting and monitoring management. Especially for the latter role, sadly lacking during the lead up to the crisis, more useful diversity and less harmony is needed on the board.
To improve public trust in business, the search for board directors has to extend beyond the world of top executives, to look for other kinds of nominees in touch with the critical stakeholders, who can bring their perspective into the boardroom and involve management in creating long term value, rather than short term gain. To get this in a systematic way, the nominating committee needs a transformation. (Improve Public Trust in Your Company: Transform the Nominating Committee | Business Ethics, Paul Strebel, 2/14/2011)