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The Nominating Committee Process: A Qualitative Examination of Board Independence and Formalization

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  • Richard Clune
  • Dana R. Hermanson
  • James G. Tompkins
  • Zhongxia (Shelly) Ye

Abstract

The nominating committee (NC) of the board identifies and nominates individuals for board service, thus establishing the board's composition. Despite this important role, relatively little is known about the NC process, including NC members' actions and thought processes. Based on interviews of 20 U.S. public company NC members, including 16 chairs, we focus on two primary questions: (1) what is the extent of influence that the Chief Executive Officer (CEO) has over committee processes, and (2) to what extent are committee processes formalized (i.e., framed and acted upon in a mechanistic way)? We find that there is continuing recognition of CEO influence in the director nomination process, the level of which varies widely by company. Also, there is considerable variability in the formalization of the director nomination process (e.g., some NCs use search firms and a matrix/grid approach to assessing director skill sets across the board, while others do not). Finally, we find that many interviewees have professional or personal ties to the CEO and that nearly all of the NCs focus on “chemistry†and comfort in the director nomination process, where the often†stated goal is to enhance the board's ability to function effectively and to reduce risk in the director nomination process. The overall message of the interviews perhaps is best captured by one interviewee, who described a “strange little dance.†Throughout the interviews, we find evidence that the NC must “dance†through a complex decision landscape.

Suggested Citation

  • Richard Clune & Dana R. Hermanson & James G. Tompkins & Zhongxia (Shelly) Ye, 2014. "The Nominating Committee Process: A Qualitative Examination of Board Independence and Formalization," Contemporary Accounting Research, John Wiley & Sons, vol. 31(3), pages 748-786, September.
    • Handle: RePEc:wly:coacre:v:31:y:2014:i:3:p:748-786
    DOI: 10.1111/1911-3846.12044
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    Cited by:

    1. Emily E. Griffith, 2020. "Auditors, Specialists, and Professional Jurisdiction in Audits of Fair Values†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 245-276, March.
    2. Adam Esplin & Karim Jamal & Shyam Sunder, 2018. "Demand for and Assessment of Audit Quality in Private Companies," Abacus, Accounting Foundation, University of Sydney, vol. 54(3), pages 319-352, September.
    3. Baldacchino, Peter J. & Gatt, Jessica & Tabone, Norbert & Bezzina, Frank, 2018. "The Nomination Committee in Maltese Listed Companies," 6th International OFEL Conference on Governance, Management and Entrepreneurship. New Business Models and Institutional Entrepreneurs: Leading Disruptive Change (Dubrovnik, 2018), in: 6th International OFEL Conference on Governance, Management and Entrepreneurship. New Business Models and Institutional Entrepreneurs: Leading Disrupt, pages 125-139, Governance Research and Development Centre (CIRU), Zagreb.
    4. Cheng‐Hsun Lee, 2022. "Non‐generally accepted accounting principles disclosures and audit committee chairs’ external directorships," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(1-2), pages 111-139, January.
    5. Karen Schnatterly & Felipe Calvano & John P. Berns & Chaoqun Deng, 2021. "The effects of board expertise‐risk misalignment and subsequent strategic board reconfiguration on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 42(11), pages 2162-2191, November.
    6. Walther, Axel & Morner, Michèle & Calabrò, Andrea, 2017. "The role of behaviorally integrated nominating committees in non-executive director selection processes," European Management Journal, Elsevier, vol. 35(3), pages 351-361.
    7. Obermire, Kara M. & Cohen, Jeffrey R. & Zehms, Karla M., 2021. "Audit committee members’ professional identities: Evidence from the field," Accounting, Organizations and Society, Elsevier, vol. 93(C).
    8. Prabashi Dharmasiri, 2023. "Social connections, CEO turnover and corporate policy change," Australian Journal of Management, Australian School of Business, vol. 48(3), pages 567-595, August.
    9. Rania B'eji & Ouidad Yousfi & Abdelwahed Omri, 2021. "Corporate Social Responsibility and Corporate Governance: A cognitive approach," Papers 2102.09218, arXiv.org.
    10. Rania Béji & Ouidad Yousfi & Abdelwahed Omri, 2020. "Corporate Social Responsibility and Corporate Governance: A cognitive approach," Post-Print hal-03144756, HAL.
    11. Orhun Guldiken & Mark R. Mallon & Stav Fainshmidt & William Q. Judge & Cynthia E. Clark, 2019. "Beyond tokenism: How strategic leaders influence more meaningful gender diversity on boards of directors," Strategic Management Journal, Wiley Blackwell, vol. 40(12), pages 2024-2046, December.
    12. Anne M. Wilkins & Dana R. Hermanson & Jeffrey R. Cohen, 2016. "Do Compensation Committee Members Perceive Changing CEO Incentive Performance Targets Mid-Cycle to be Fair?," Journal of Business Ethics, Springer, vol. 137(3), pages 623-638, September.
    13. Steven Balsam & So Yean Kwack, 2022. "The impact of connections between the CEO and top executives on appointment, turnover and firm value," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(5-6), pages 882-933, May.
    14. Lee, Wei-Ming, 2020. "The determinants and effects of board committees," Journal of Corporate Finance, Elsevier, vol. 65(C).
    15. Hildur Magnusdottir & Audur Arna Arnardottir & Throstur Olaf Sigurjonsson, 2023. "Selecting Nomination Committee Members—Stakeholders’ Perspective," Sustainability, MDPI, vol. 15(6), pages 1-21, March.

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