Governance of a corporation rests with its board of directors, who are collectively responsible for:
Source: Kennesaw State University Center on Corporate Governance, White Paper on 21st Century Governance and Audit Committee Principles May 8, 2007
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 to impose new regulations on the financial industry. The act aims to prevent another significant financial crisis by creating new financial regulatory processes that enforce transparency and accountability while implementing rules for consumer protection.
This is the working culture created when a board of directors fails to create a process that assures a rational turnover of board membership. Entrenched boards of directors risk becoming stale, failing to seize opportunities for strategic growth or innovation.
Together with the audit and compensation committees, the nominating/corporate governance committee rounds out the three standing committees of a public company’s board of directors. It plays a critical role in overseeing matters of corporate governance for the board, including formulating and recommending governance principles and policies. As its name implies, this committee is charged with enhancing the quality of nominees to the board and ensuring the integrity of the nominating process. Given the recent focus on board composition and diversity, director elections, and proxy access, the role of nominating/corporate governance committee is in the spotlight.
The Sarbanes-Oxley Act of 2002 was passed by Congress and signed into law in the wake of the Enron and WorldCom scandals. The aim of the act is to protect shareholders and the general public from accounting errors and fraudulent practices that allowed these companies to overstate revenues and understate liabilities.
This is a process by which the Nominating and Governance Committee can review and compare the education, training and experience of sitting board members against needs identified on the board given the planned strategic direction of the firm. The committee should work to fill that gap so there is expertise on the board to assure effective oversight.