FRC publishes feedback statement on its Discussion Paper on board succession planning

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24 May, 2016

The Financial Reporting Council (FRC) has published a feedback statement on its Discussion paper on board succession planning for both executives and non-executives.

The Discussion Paper, published in October 2015, aimed 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 was 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 explored 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 feedback statement summarises the responses received under these six areas.   The FRC comments:

An active nomination committee is key to promoting effective board succession. Committees should consider carefully the future membership of their boards and ensure that this is aligned to company strategy, both current and future.

Feedback indicated that there was “some support” for further guidance, particularly in the areas of the role of the nomination committee and reporting on succession planning.  The FRC, as part of its Culture Coalition Project, will consider providing such guidance as part of the revision of the Guidance on Board Effectiveness.  The FRC will also provide comments on its reviews, performed during the current reporting season, of nomination committee disclosures (including board evaluation reporting for the FTSE 350) in its 2016 Developments in Corporate Governance and Stewardship report.

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