Effective corporate governance
requires strong boards composed of qualified and competent members exercising
objective and independent judgement to guide strategy development and monitor
management. The key challenge in the nomination process of directors to State
Owned Enterprises’ (SOEs’) boards is to prevent the process to degenerate into
a situation characterized as “political influence interference”.
The main way of restricting
such governmental or political interference in the nomination of SOEs’ boards
and increasing their independence and professionalism is to put in place a
structured nomination process, making sure that the ultimate selection
criterion is competency. Some countries, such as Australia, New Zealand and
Sweden, have set up such structured and clearly skills-based nomination systems.
With or without a structured nomination process, a growing number of countries
maintain databases of qualified candidates. They also increasingly rely on the
professional services of recruitment agencies or on advisory bodies in
government.
The key elements of a
structured and transparent board nomination process of directors who are
committed to the organization and possess skills, knowledge and other
attributes needed in order for the board to effectively carry out its
responsibilities include: 1. Professionalising the nomination process, 2.
Developing clear selection criteria, and 3. Enhancing public scrutiny of
results.
1. Professionalising the nomination process
In many if not most countries,
line ministries play a major role in the board nomination process. Many
countries are taking steps to professionalise and streamline the nomination process
to make it more merit-based by
(i) Putting in place effective board recruitment and nominations
process (ii) Involving an advisory body
in the process(iii) Ensuring
timely selection (iv) Issuing a
letter of appointment (v) Organising
orientation sessions
2. Developing clear selection criteria
The board should link
recruitment to its strategic plan. The strategic plan’s components are
prioritised and the corresponding skills needs are identified. Thus by
reviewing the organization’s strategic plan as well as the profile of current
board’s strengths and weaknesses, the Nominations Committee identifies the gap
between the skills and knowledge needed on the board, and what board directors
currently possess. Based on this analysis, the Committee will have a skills
profile for new directors. The Nominations Committee will then discuss the
draft skills profile with the advisory body. Once the draft skills profile
together with the position and person description are finalised and approved by
the parent or shareholding Ministry, it will form the basis for a director
search for board recruitment.
The advisory body will then
take over and draw up an initial short-list of candidates by matching the
requirements of the position with the skills and experience of the potential
candidates from the pool of potential directors in its database, from the pool
of private sector talent that can be tapped for SOE boards and from
representatives of a wider range of stakeholder groups. It is from this list that
the shareholding ministry will be recruiting the suitable candidate(s) for the
SOE board.
3) Ensuring public disclosure and scrutiny
Greater professionalism and
transparency can be achieved by increasing public disclosure of the nomination
process of the final appointments. Full disclosure on the website of the
shareholding Ministries of the nominations procedure and the experience and
background of selected candidates will allow the public and stakeholders to
assess the suitability and independence of each candidate.
With this more professional
approach in the nomination of SOE boards as established by this process which
is supported and supervised by the advisory body, there is a greater
possibility of achieving competent and qualified boards.
