The FRC has published a discussion paper on UK Board Succession Planning. The paper focuses on board succession for executives and non-executives of companies to which the UK Corporate Governance Code applies, although the FRC notes that its content may also have relevance for other organisations. Although focusing on board succession, this inevitably also involves consideration of succession below board level.
The FRC’s interest stems primarily from the fact that the quality of succession planning is one of the most frequent issues highlighted as a consequence of board evaluation. The FRC also wants to address the Parliamentary
Commission on Banking Standards’ recommendations to the FRC on issues around director nomination - in its final report, the Commission commented that there is a ‘widespread perception that some “natural challengers” are sifted out by the nomination process. The nomination process greatly influences the behaviour of non-executive directors and their board careers’.
The aim of the discussion paper is therefore to look at the key issues, to identify suggestions for good practice and, more specifically, to examine how the nomination committee can play its role effectively. Issues explored include:
- how effective board succession planning is important to business strategy and culture;
- the role of the nomination committee;
- board evaluation and its contribution to board succession;
- identifying the internal and external ‘pipeline’ for executive and non-executive directors;
- ensuring diversity; and
- the role of institutional investors.
The FRC is seeking to provoke discussion, and welcomes feedback on its approach and to the issues and questions posed. Comments should be submitted by 29 January 2016. The FRC will analyse responses, publish its findings, and consider whether any further action is needed. To view the discussion paper in full, click here.