Title: A study of the incidence and independence of nomination committees

Authors: Suwina Cheng; Bruce A. Rayton

Addresses: Department of Accountancy, Lingnan University, 8 Castle Peak Road, Tuen Mun, Hong Kong. ' University of Bath School of Management, Claverton Down, Bath BA2 7AY, UK

Abstract: The purpose of this study is to understand the factors influencing the adoption and independence of nomination committees. Previous literature identifies potential substitutability and complementarity between corporate governance arrangements that may be beneficial from the perspective of outsiders (e.g., Rediker and Seth, 1995), but our work suggests that similar complementarities may be identified from the perspective of firm insiders. Probit analysis of data from the annual reports of UK public companies from 1998 through 2002 reveals that the shareholdings of substantial shareholders are positively related to the selection of non-executive members to the nomination committee, but that these shareholdings are negatively related to the use of nomination committees in the first place. Coupled with the participation of over 40% of UK CEOs on the appointment committees of their own firms, these results suggest that some appointment committees are used to limit the influence of substantial shareholders on future board appointments.

Keywords: boards of directors; nomination committees; demographics; board composition; agency theory; corporate governance; firm insiders; annual reports; UK public companies; shareholdings; United Kingdom; committees.

DOI: 10.1504/IJCG.2012.045283

International Journal of Corporate Governance, 2012 Vol.3 No.1, pp.84 - 104

Published online: 10 Apr 2015 *

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