Nomination Committee Research Articles

How Does Shareholding by Passive Institutional Investors Impact the Corporate Governance of European Firms?

ABSTRACTResearch Question/IssueThe passive investment (PI) trend, characterized by the increasing inflow of investment funds into PI strategies, has resulted in an increase in the share of corporate ownership held via investments in PI strategies. This paper investigates this trend's consequential impact on European companies' corporate governance (CG).Research Findings/InsightsWe find that higher ownership by passive institutional investors (PIIs) is associated with fewer female directors, reduced independence in audit and nomination committees, and higher executive pay, negatively impacting CG. Nevertheless, our findings show that PIIs can increase the probability that a company has a policy regarding the adequate experience of board members and equal treatment of shareholders.Theoretical/Academic ImplicationsWe hypothesize that the level of ownership could be the missing link connecting mixed theories about the impact of ownership by PIIs on the CG of companies they invest in. A curvilinear relationship between the two could allow conflicting theories to coexist in one framework. We find weak evidence for a curvilinear relationship, but this relationship may become more prevalent if PII ownership of European companies increases because of regulatory changes.Practitioner/Policy ImplicationsSome critics have proposed limiting PII voting rights, but our findings suggest that the effect of PII ownership may become less negative beyond a certain level of ownership and that PIIs may play a positive role in enhancing board experience and shareholder equity policies. Restricting PIIs may not necessarily be beneficial for the CG of companies they invest in.

The composition of listed family firm boards in South Africa: Alignment to best practices and governance codes

Purpose: As elsewhere in the world, family firms (FFs) play a critical role in the South African economy. There is, however, scant research on how, if at all, listed South African FFs differ from their non-family counterparts concerning board composition and independence. The purpose of this study was to address this knowledge gap by investigating director and chair independence, chair-chief executive officer (CEO) role duality, board race and gender diversity, as well as board rotation at FFs listed on the Johannesburg Stock Exchange (JSE) over the period 2006 to 2022. The study was informed by the agency, socioemotional wealth, and stewardship theories.Design/methodology/approach: Data were collected on 753 directors who served on the boards of 37 JSE-listed FFs. Data sources included Bloomberg and the FFs’ integrated reports and websites. Data were analysed by examining trends in the considered variables over time.Findings/results: While family involvement at board level remained relatively constant, considerably fewer family members served as board chairs and CEOs towards the end of the research period. Board independence increased significantly over the research period.Practical implications: Shareholder activists’ requests for improved board governance of JSE-listed FFs seem justified. Activists should, however, also consider the benefits of family stewardship when evaluating director and chair independence in these firms. This study also identifies practical implications for nomination committees and investor education.Originality/value: The use of multiple theoretical lenses provides a balanced view of board governance at JSE-listed FFs. The study contributes to the scant body of knowledge on board composition and independence in listed FFs in South Africa, which will enable future FF research.

Effectiveness of the Nomination Committee in Chinese Conditions

Effectiveness of the Nomination Committee in Chinese Conditions

The impact of corporate governance on firm performance: panel data evidence from S&P 500 Information Technology

This research is important for both the academic and business environments due to the extraordinary results obtained. Additionally, the significance of the study is also attributed to the addressed topic, which is intensively studied in the world of corporate finance. The primary aim of this research is to scrutinize a cohort of 66 information and technology (IT) companies, all of which are constituents of the American Standard and Poor’s 500 Index (S&P 500). The study period spans two decades, covering the years 2003–2022. To summarize the outcomes, the analytical framework incorporated linear models with both fixed (fe) and random effects (re), as well as quantile regression models. This study's key outcomes highlight that firm size, sales growth, current ratio, long-term debt to capital, free cash flow, asset turnover and receivable turnover, board meeting frequency, female board representation, chief executive officer age, audit committee independence, and the presence of compensation and nomination committees, alongside a pandemic indicator, positively impact firm performance. Conversely, firm age, dividend payout ratio, effective tax rate, board size, chief executive officer duality, and corporate social responsibility committee presence have negative effects on performance. Also, regarding quantile regressions, CEO duality significantly influences companies with high profitability rates, and companies with low to medium profitability rates are more strongly and negatively influenced by board size. The implications of the core policy in this research focusing on corporate governance will consider certain rules and guidelines regarding financial transparency and protecting shareholders' interests. Additionally, it will take into account the independence of the board of directors and the presence of its committees, as well as ethical leadership practices.

Adverse Contagion? Populist Radical Right Parties and Norms on Gender Balance in Political Institutions

How do male-dominated populist radical right (PRR) parties relate to and influence norms around women’s political inclusion and leadership in mainstream political parties? While research has focused on describing the male dominance of PRR parties or its influence on mainstream political parties’ policies, particularly immigration, we know less about how PRR parties relate to norms on women’s inclusion or gender-balanced representation in mainstream parties. In a theory-building effort, we posit that PRR parties may seek to (a) adapt to mainstream parties’ norms and include more women in leading positions (positive contagion) or (b) negatively affect or even challenge norms around women’s inclusion in mainstream parties (adverse contagion). Seeking to theorize this relationship further, we explore leadership selection in the Swedish Parliament, where gender balance constitutes a strong norm. Yet, following the 2022 elections, the proportion of women parliamentary leaders dipped below 30% for the first time in decades. At the same time, the Sweden Democrats, a male-dominated PRR party, emerged as the second-largest party in Parliament. Drawing on interviews with nomination committees, party documents, and data on leadership, we empirically investigate continuity and change in committee leadership appointments in the Swedish Parliament and the role of the radical right in this process. We do not find signs of adverse contagion in the short run: as of 2023, norms promoting gender balance appear to remain robust and enjoy widespread support among mainstream parties. Yet, neither do we find signs of positive contagion where the radical right adapts to mainstream norms around gender balance.

Board committees as catalysts: Divulging the impact of nomination and risk management on corporate eco‐innovation and carbon performance

AbstractDrawing on a theoretical integration perspective, this research responds to the latest calls in sustainability accounting by comprehensively exploring the moderating roles of two board sub‐committees: the nomination committee and the risk management committee, in the relationship between corporate eco‐innovation and carbon performance. This study contributes to the current literature in sustainability accounting by utilizing panel data from non‐financial listed firms on the Australian Securities Exchange (ASX) for the period spanning from 2011 to 2022. To mitigate potential endogeneity bias, various econometric techniques, including instrumental variable modeling, were employed. The robust findings confirm a positive and statistically significant relationship between eco‐innovation and carbon emissions reduction. Moreover, both the nomination committee and the risk management committee emerge as significant moderators of this relationship. These empirical findings hold valuable practical, theoretical, and policy implications for diverse stakeholders seeking a comprehensive understanding of the role of board sub‐committees as effective monitoring tools that support corporate carbon performance by encouraging firms to actively embrace eco‐innovation practices. As a result, our evidence underscores the significance of giving due attention to board sub‐committees when configuring the board's structure and setting expectations for carbon reduction performance.

Director Selection: Drivers for the Adoption and Design of Nomination Committees by New Zealand National Sport Organizations

Nomination committees (NCs) are a critical, yet under-researched, part of the good governance equation. This study contributes to baseline knowledge of NC adoption and design. Underpinned by critical realism, four national sports organization case studies explain the “why” and “how” of NC adoption through a multitheoretical lens. Change strategies are identified using Hampel et al.’s mechanisms (symbolic, relational, and material) approach to institutional (creation) work outcomes. Archer’s morphogenetic cycle helps to demonstrate the interplay between structure, culture, and agency in achieving the change with the study, providing a timely reminder of the power of morphostasis (inertia). The results are important for future NC design to better inform national sport organization NCs’ structures and processes (including case-appropriate balance between community and corporate logics in national sport organization governance re-configurations) and aid future evaluations of NC effectiveness. A critical realism multitheoretical and multicase approach is modeled for future sport management studies.

Structural positioning of nomination committees: Evidence from Iceland

Nomination committees (NCs) are the subject of ongoing scholarly and professional debates regarding their purpose, practices, and organizational structure. Existing research suggests that NCs can enhance corporate governance by improving the process through which directors are appointed (Al Absy & AlMahari, 2023; Grove et al., 2020). In Nordic corporate governance, these committees are integrated in various ways, either as shareholders committees or subcommittees of the board. Iceland, a Nordic country, serves as a critical case study for investigating perspectives among stakeholders on the structural positioning of NCs — whether they should operate as subcommittees of corporate boards or shareholders committees. This unique context of Iceland adds a layer of intrigue and curiosity to our research. Interviews were conducted with thirteen individuals comprising shareholders, board members of publicly listed companies, and nomination committee members. Additionally, surveys were distributed among shareholders, board members, and nomination committee members of Iceland’s 300 largest corporations in 2020 and then again in 2023. The findings suggest that NCs should be shareholders’ committees voted by the shareholders instead of board committees. Such an arrangement is proposed to optimize the benefits for shareholders and boards in forming and operating NCs.

Corporate Governance and Operational Performance of Banks in the MENA Region

This article aims to study the impact of corporate governance on the performance of banks operating in the MENA region over the period 2009-2020. The results, obtained using the maximum likelihood method and the system generalized method of moments (system-GMM), show that the size of the board of directors, CEO-chairman role duality, ownership concentration and the presence of remuneration and nomination committees have a significant impact on the performance of banks in MENA countries. In addition, the empirical results revealed that bank size, credit risk, capitalization ratio, economic growth and the quality of the institutional environment are indeed explanatory factors of bank performance. Our findings provide useful information to regulatory authorities to improve the governance mechanisms of banks in the MENA region.

Barriers to Recruitment of Women to South African Mining Boards

Mining as a historically male-dominated industry in South Africa has legacy issues stemming from colonisation and apartheid, which contributed to gender (and racial) disparities. To address these disparities, corrective measures in the post-apartheid legislation and government policies have aimed to promote equal participation of women in the mining industry at all levels, including key leadership positions such as board memberships. However, despite two decades of enforced legislation, the representation of women in boardrooms remains below 22%. To better understand this issue, qualitative research was conducted through interviews with 28 directors in the South African mining industry. These interviews delved into the recruitment process and the criteria used for selecting directors within the industry. Nkomo and Ngambi’s meso-level framework guided the identification and classification of barriers reported in the literature on obstacles impeding women’s appointment to boards at individual/psychological, organisational/structural, and social/societal levels. Thematic analysis showed the prevalence of organisational and structural prejudices and barriers in the recruitment process and criteria. The male-dominated nomination committees drive recruitment by selecting acquaintances from their own networks whom they overpower in decision-making. This network reinforces the old boys’ club and glass ceilings, contributing to the lower confidence of women. This research recommends organisational structural policy-level changes to accelerate female board recruitment by imposing at least 40% female board representation. A balanced gender role combination of chief executive officer and chairman positions on each board is likely to break barriers associated with the male-dominated boardroom culture and practices.

Empirical Analysis of Good Corporate Governance and Firm Value on Sharia Banking in Indonesia

The position of Islamic banking in Indonesia still needs improvement because currently the market share of Islamic banking is only 6.52% of the entire proportion of national banking. So that the government seeks to improve by launching the Roadmap for the Development of Indonesian Sharia Banking (RP2SI) 2020-2025. However, there are things that hinder the accelerated growth of the sharia banking business, including the absence of significant business model differentiation, sub-optimal quality and quantity of human resources. So that GCG analysis is needed to increase the value of Islamic banks. The purpose of this study is to see how much influence the GCG has on firm value using PBV theory. The research method used in this study is multiple linear regression analysis with secondary data of 13 Islamic Commercial Banks in Indonesia in 2017-2021. The results show that the Audit Committee, Corporate Governance Committee, and Risk Management Committee have a significant effect on firm value. Meanwhile, the Board of Commissioners, Remuneration and Nomination Committee, Risk Monitoring Committee and Institutional Ownership have no effect on company value.

You Are the One: Nomination Committees and the Market Reaction to CEO Succession

You Are the One: Nomination Committees and the Market Reaction to CEO Succession

The Impact of Remuneration and Nomination Committee on Earnings Management in Jordan

The Impact of Remuneration and Nomination Committee on Earnings Management in Jordan

Nomination committees in Australia, outcomes for influence of a powerful CEO and diversity

PurposeThe authors investigate the adoption of nomination committees in Australia and identify the managerial power perspective as one explanation for firms not establishing nomination committees. A positive outcome of establishing a nomination committee from the perspective of board diversity is also examined.Design/methodology/approachThe authors adopt an archival approach by collecting data for firms listed on the Australian Securities Exchange (ASX) during the period 2010 to 2018. The authors establish the prevalence of nomination committees for small medium and large Australian firms. Regression analyses are used to determine whether the power of the chief executive officer (CEO) influences the adoption of a nomination committee. The association between having nomination committee and board diversity is also analyzed using regression analyses.FindingsLess than half of firms adopt a nomination committee. Larger firms are more likely to adopt a nomination committee than medium and smaller sized firms. Firms with less powerful CEOs are more likely to adopt a nomination committee. Adoption of a nomination committee is also associated with greater board tenure dispersion and board gender diversity in medium and smaller sized firms.Originality/valueEvidence on nomination committees provides original research that extends previous research focusing on the audit, risk and remuneration committees and samples restricted to large firms. The nomination committee has an important role to play in the appointment of directors yet limited evidence exists of the adoption rate, explanation for non-adoption and benefits of adoption. The authors add to this evidence.

FOSTERING ECONOMIC RESILIENCE THROUGH CORPORATE GOVERNANCE PRACTICES: EVIDENCE FROM MANUFACTURING SECTOR COMPANIES IN SRI LANKA

This study examines the role of corporate governance practices (CGPs) in fostering economic resilience within the manufacturing sector companies in Sri Lanka. Economic resilience is a crucial aspect of sustainable economic development, enabling organizations to withstand and recover from adverse events or disruptions. Corporate governance, on the other hand, represents the mechanisms and processes through which companies are directed and controlled, influencing their performance and stability. Using data from ten manufacturing companies (n=10) listed on the Colombo Stock Exchange (CSE) this research analyzes the relationship between corporate governance practices and economic resilience in the context of the manufacturing sector in Sri Lanka. The study utilizes quantitative measures, such as board size, board independence, board gender diversity, the existence of an audit committee, the existence of a nomination committee, board meetings, and CEO duality to measure CGPs, and manufacturing sector performance as a mediating variable. Economic resilience was used as the considered as the outcome variable. Relevant data were extracted from the annual reports of the chosen companies for the period from 2015 to 2019. Finally, 50 observations were used for the data analysis. The Pearson correlation test was executed to determine the relationship between CGPs, manufacturing sector performance, and economic resilience. Multiple regression analysis was performed to determine the explanatory power of the combination of these three segments. The findings highlight that manufacturing sector performance has a negative correlation with fiscal deficit to GDP which means that manufacturing sector performance increases and the budget deficit goes down which impacts on economic resilience of the country. The regression results suggest that board gender diversity has a significant relationship with manufacturing sector performance and the performance of the manufacturing sector. Moreover, the performance of listed manufacturing companies has a mediating effect on the economic resilience of the country and CGPs. The insights from this study provide valuable guidance for policymakers, regulators, and manufacturing sector companies in Sri Lanka, enabling them to prioritize and implement corporate governance reforms that enhance economic resilience.

책문화생태계 활성화를 위한 출판 거버넌스 고찰

This study examined the publishing governance for the revitalization of the book culture ecosystem, and proposed a plan by analyzing its characteristics and problems, focusing on the composition of the board of directors of the KPIPA. In order to revitalize book culture, an ecological perspective that solves problems from an integrated perspective and organic connection of various actors in the ecosystem must be applied, and it is sustainable with the cooperation of various members of the ecosystem. As a result of the study, first, the board of directors is composed mainly of publishing organizations and publishers. Second, there is no participation of various stakeholders from the perspective of the book culture ecosystem, such as authors, publishers, bookstores, libraries, and readers. Third, the composition and operation of the board of directors is male-dominated, and as a public institution, it does not comply with the Gender Equality Act. Fourth, there is a structural problem with the regulations of the executive nomination committee in the articles of incorporation of the KPIPA. Fifth, the Ministry of Culture, Sports and Tourism, which is responsible for changing bad governance to good governance and cooperative governance, failed to properly fulfill its role as a mediator.

Investigating earnings management practices and the role of the board and committees in emerging markets: Evidence from Malaysian public companies

AbstractThis study was aims to examine the significant elements of the audit and board committee in predicting earnings management (EM) for the period of 2010–2021. The study population comprised total number of 775 listed firms on Bursa Malaysia's main market. The annual audited financial statements and reports of the listed firms, firm's websites, Bloomberg and the Bursa Malaysia website were used as method of data collection. The analytical method used in the current study was descriptive statistic and GLS methods of panel regression. The findings of this study suggested that firms with effective CG mechanisms such as, audit committee size (AUDSIZ), audit committee financial expertise (AUDFEXPT), remuneration and nomination committee (R&NC), supervisory board size (SBS), mitigates accrual, and REM. However, the findings also indicated that gender composition (CGEND) were found to be ineffective in predicting EM.

The Interaction Effect of Nomination Committee’s Effectiveness on Board of Directors’ Characteristics and Firm Performance

This study aimed to examine the interaction effect of the nomination committee’s effectiveness on the board of directors’ characteristics and firm performance (measured by return on assets and earnings per share). The nomination committee was scored for committee separation, size, independence, meeting frequency, and the number of female directors. The study selected all listed firms on the Bahrain Bourse for two years, 2020 and 2021, using ordinary least-squares regression to examine the relationship. The results showed that the interaction of the nomination committee with some characteristics of the board of directors had a significant impact on firm performance. With the interaction of the nomination committee, board meeting frequency became significantly positively associated with firm performance as measured by return on assets and earnings per share, as opposed to the insignificant results found in the direct relationship. Similarly, with the interaction of the nomination committee, the number of female directors became more significantly positively associated with firm performance using the measurement of return on assets, while it became significantly positively associated with firm performance using earnings per share, compared to an insignificant positive impact found in the direct relationship. The results show that there is a need to re-evaluate the role of the board of directors and strengthen its effectiveness. This study is the first to alert policymakers, businesses and their stakeholders, and researchers to the significance of having an effective nomination committee, which could play an important role in enhancing the board of directors’ effectiveness and hence firm performance. It makes a significant contribution to the literature by providing empirical evidence on the interaction impact of NC (as a score) on BOD characteristics and firm performance.

Nomination committee characteristics and exposure to environmental, social and governance (ESG) controversies: evidence from European global systemically important banks

PurposeBased on the agency and resource dependence theories, this study aims to investigate whether nomination committee (NC) characteristics could serve as key attributes for reducing environmental, social and governance (ESG) disputes and whether NC composition affects the appointment of ESG-friendly directors to the board.Design/methodology/approachThis study focuses on a sample of 30 global systemically important banks from 2015 to 2021. The authors estimate panel data models with fixed effects, clustering heteroskedastic standard errors at the bank level to account for the serial correlation of the dependent variables for each bank.FindingsBanks’ exposure to ESG controversies can be reduced when NC members have specific skills, in particular when at least one member of this committee also belongs to the sustainability committee and is a foreign director. Moreover, banks’ ESG disputes decrease when the NC members are younger, while the share of independent NC members has a negative impact. Finally, a positive influence of NC composition and its members’ features as well as the appointment of ESG-friendly directors on the board is found.Originality/valueThe findings are particularly useful during periods such as the current one, when there is growing attention to both banks’ corporate governance, the subcommittees’ role and functioning and social and environmental issues. This study shows that the NC is important in reducing the likelihood of banks incurring ESG disputes and in appointing more ESG-friendly directors. NC effective functioning and its members’ qualities serve as a key attribute for fulfilling objective assessment and improving board effectiveness.

Selecting Nomination Committee Members—Stakeholders’ Perspective

Sustainability is a critical issue for businesses today, and corporate boards and nomination committees play a vital role in promoting sustainable practices within organizations. Nomination Committees (NCs) have become important mechanisms for what has been coined as good or sustainable governance. Stakeholders, however, have different opinions on the merits of these committees. Amongst other things, there is disagreement about whom to select for NCs and the criteria for selection. The composition of NCs can influence board nominations and determine whether the necessary knowledge and skills reside within a board to deal with sustainability and good corporate governance. The aim of this research is to provide insights into stakeholders’ perspectives on what matters when profiling nomination committees’ members. The literature on NCs is underdeveloped, and this research importantly addresses the issue by interviewing 13 individuals who are either shareholders, board members of listed companies, or members of NCs. Additionally, a questionnaire was sent to shareholders, board members, and NC members of the 300 largest companies in Iceland. A total of 138 responses were received. The results show that stakeholders believe it is important to decide upon an NC’s composition prior to electing its members. NC members should have either management or board membership experience. Diversity within the committees is also seen to be important, as it can influence diversity and inclusion overall at the board level. These research results provide important insights and understanding for shareholders and boards of directors when composing nomination committees.