FRC publishes a Discussion Paper on board succession planning

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28 Oct 2015

The Financial Reporting Council (FRC) has published a Discussion paper on board succession planning for both executives and non-executives of those companies to which the UK Corporate Governance Code applies. The content within the Discussion Paper might also be relevant for other organisations.

The FRC Discussion Paper aims 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”.  It has been published in response to calls from stakeholders and also to address the recommendations of the Parliamentary Commission on Banking Standards which provided recommendations to the FRC around director nomination.

The Discussion Paper highlights that “good succession planning contributes to the long-term success of a company” and that the absence of a succession plan “can undermine a company’s effectiveness and its sustainability”.  It then goes on to say that “unless boards plan in advance for both executive and non-executive positions, they will struggle to ensure that the right mix of diverse skills and experience is in place”

The Discussion Paper explores six areas that the FRC considers are important to succession planning:

  • 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 the approach and to the issues and questions posed.  The press release and Discussion Paper are available on the FRC website (links to FRC website). Comments are requested to be submitted by 29 January 2016.

Our Governance in brief publication on the Discussion Paper is available here.

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