Problem
Electing Board Members to satisfy a diversity concern.
Introduction
Management of BOD, al large company after tax of R3.7 billion, agreed to share the impetus as well as its process involved with recruiting board members. While the process will be time consuming, the effort ultimately must be successful in achieving the
goals of strengthening the make-up of the Board and increasing diversity.
Company Profile
A publicly traded energy company with 2015 revenues in excess of R3 billion, there are now nine members of the board of directors, including its recently appointed first female board member. She serves on both the nominating and audit committees. The other committees are:
a) Remuneration Committee
b) Social and Ethics Committee
c) Environmental Committee
The other 8 directors consists of 3 Black people and 5 white people. The directors who are nearing retirement are all white.
The Company is committed to revisit the composition of the board and its committees.
The Board of Directors recognized in recent years the clear benefits of increasing diversity on the board, both in terms of demographics and skill set. With four of the nine board members nearing retirement, the timing presented an opportunity. About 7 months before the annual general meeting a Thirty Percent Coalition institutional investor member put forward a shareholder proposal concerning board diversity. Through a constructive dialogue between the Coalition's Executive Director, investors and management, the shareholder proposal was successfully withdrawn in exchange for language modification in
the governance guidelines with respect to diversity.
With respect to sourcing candidates to join the Board, the current Board declined the option of hiring a recruiting firm and instead chose to directly source candidates from their own networks. Specific criteria for the candidate were fairly relaxed as the Board was comprised primarily of former CEOs. The candidate did not have to be a CEO; however prior board experience was desirable. The group must now identify potential candidates, meet with them, and discuss possibilities at their Board meetings.
This is a very challenging time for the Company as it was unable to elect any new Board members at its annual general meeting so management scrambled to revise the proxy to drop its nomination of the candidates. Instead, the Board committed to resuming the search process and wanted to add candidates before the next annual meeting.
Advise BOD on the following:
• Will the existing committees of the board suffice or do they need more?
• The procedures to follow in electing new members to the board.
• How to make sure that diversity will be achieved.
• How to implement King IV to work out the criteria BOD should use to nominate and elect the candidates.