The review focused on the effectiveness of board succession planning on business strategy and culture as well as the overall role of the nomination committee, in order to achieve a talented, diverse pipeline of directors.

In the feedback statement from FRC setting out responses to the initial call for comment earlier this year, many respondents, including investors and key stakeholders, said that companies should be able to link the succession plan and talent development programme to the wider corporate strategy. There were also concerns about the lack of diversity on top boards and failure to change recruitment processes to broaden the talent pool.

The question regarding greater diversity in the boardroom achieved the highest response rate with respondents concerned about executive search, selection and the pipeline in regards to broadening the range of potential candidates. There was a strong message that more needs to be known about the link between diversity, strategy and business value; and the way that greater diversity encourages more diverse thinking.

The feedback statement said: ‘Search consultants should be pressed to look more broadly for talent; be given guidance about what is expected; and have the confidence  to challenge appropriately where boards do not appear to be open minded to diverse candidates.’

Boards should tell external recruiters what they are searching for in terms of ethnicity, gender, skills and experience, and should not be scared to push back and challenge firms if they are not receiving the type of candidate they want.

Nomination committee

There is a lack of awareness and understanding about the roles and responsibilities of nomination committees. In order to achieve this, investors preferred the idea of updates in annual accounts and investor meetings to focus on the effectiveness of the board.

There is currently little discussion on the role and operations of the committee and more information is needed so that investors can take a more active role, for example, by recommending candidates for consideration, although this should not interfere with company activity.

Board evaluation

Board evaluations also need to inform and influence succession planning, and this should not be considered once a year only as part of the annual evaluation, but should become a continual process.

Investors felt that not enough is known about board evaluations and called for more transparency about which topics the evaluation looked at, weaknesses found and action needed to address any concerns.

The board evaluation should not only focus on the effectiveness of the current board but should also include the needs of the future board.

Pipeline

One of the FRC’s concerns is that there is inadequate forward planning to ensure a solid pipeline of high quality internal candidates. The report stressed that talent management is important to provide a variety of internal candidates and should be viewed as a motivational force for people to develop their careers. As such, the nomination committee needs to work more closely with talent management.

FRC chairman, Sir Win Bischoff commented: ‘Companies which plan ahead effectively for board renewal are more likely to achieve a better combination of diverse skills and experience needed for long‑term success. The nomination committee should also consider its role in developing the talent pipeline within the company.’

More on the FRC Feedback Statement: UK board succession planning discussion paper is here.