Nominating and Governance Committee Blueprint

Over the past three years, whirlwind changes—including the global pandemic, social justice movements, geopolitical conflicts, economic uncertainty, and climate-driven disasters—have transformed board workloads and agendas.

No board has been left untouched, and the nominating and governance committee has been affected by the following forces: 

• Changing market dynamics. The ambiguous state of the economy in the United States and elsewhere is impacting companies’ strategic priorities and driving an accelerated evaluation by the nominating and governance committee of the skills and experiences required by the board to guide and challenge management. Assumptions about who is adding value to the board have been challenged, with older directors sometimes having the only experience dealing with a period of persistent high inflation. Continually assessing the board’s experience and skill gaps in light of changing economic conditions and corporate strategy will be a crucial ongoing function of the committee moving forward.
• Environmental, social, and governance (ESG) issues and sustainability. The rise of ESG has led to increased scrutiny of corporate sustainability and responsible business practices and board oversight of these areas. Stakeholders and regulators are demanding greater transparency in ESG and sustainability-related decision-making processes. In many organizations, board oversight of ESG matters falls to the nominating and governance committee, and the committee will need to appropriately adjudicate responsibilities for oversight of ESG matters that can sometimes span multiple committees.
• Board diversity and inclusion. Though diversity, equity, and inclusion (DE&I) is sometimes considered under ESG, this blueprint will focus on it separately to address DE&I through the lens of board composition. Investors, employees, consumers, and regulators expect boards to reflect the diverse perspectives and experiences of their stakeholders. Embracing DE&I has elevated the role of the nominating and governance committee to seek out candidates who bring high-level talent, experience, and expertise from their respective professional capacities and backgrounds, and are also able to provide additional perspective from underrepresented or diverse groups. The committee will play a critical role in shaping a more diverse board with greater breadth and depth of experiences and perspectives, and in ensuring an inclusive and interactive environment for all board members.
• Scrutiny of governance practices. As corporate scandals and failures continue to make headlines, there is a growing demand for boards to exercise rigorous oversight of management and enforce accountability. The nominating and governance committee requires a well-considered approach for ensuring the board maintains an open and candid culture and is composed of qualified, ethical directors who are capable of challenging and guiding management as needed and as the business environment continues to evolve and change. 
• Technological advancements. As businesses rely more on technology to drive growth and innovation, boards are expected to have a deeper understanding of the risks and opportunities presented by these advancements. This has led, and will continue to drive, a greater emphasis on the nominating and governance committee’s recruitment of directors with technology expertise and digital transformation experience to ensure that the board has the processes and procedures in place to effectively oversee cyber and technology-related risks, including artificial intelligence (AI).
• Emphasis on board effectiveness and performance evaluation. Investors and other stakeholders are interested in understanding how boards operate and whether they are fulfilling their oversight responsibilities effectively. This investor and broader stakeholder scrutiny of board performance is likely to continue into the future. As a result, the nominating and governance committee must focus on evaluating the directors’ skills and expertise, identifying gaps in the board’s capabilities, and recruiting new directors who can fill these gaps.

Board performance, composition, and culture can be either a corporate asset or a liability, depending on how effectively the board fulfills its responsibilities and supports the company’s long-term success. 

A weak board can be a liability, potentially leading to poor decision-making, lack of accountability, and reputational harm. Boards composed of directors that lack diverse experience, perspectives, and skills may not be able to provide meaningful oversight and manage evolving risks.

However, an effective board can provide valuable strategic guidance, oversight, and risk management expertise, helping to drive growth, enhance stakeholder value, and mitigate risks. Boards that include diverse perspectives and expertise can also foster innovation and better decision-making. This blueprint details how nominating and governance committees can leverage these qualities to turn the committee and the board itself into a strategic asset for the company.

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