Page 172 - F1 - AB Integrated Workbook STUDENT 2018-19

Chapter 11

2.8 Nomination committee

A nomination committee is formed in order to ensure that the
composition of the board is balanced. It monitors the process for
appointment of directors to the board of directors as well as making
recommendations for appointments to the board.

2.9 Nomination committee

The public is a legitimate stakeholder in a large company. This means that the public
has a ‘right to know’ how such a company is being governed as well as a right to be
involved in the governance process.

The most obvious means of public oversight of corporate governance is via the
publication by companies of their Annual Report and financial statements. While
companies are required by law to send a copy of this information to every
shareholder, many companies will also post a copy on their website.

In addition, most companies are required to submit their annual financial statements
to a regulatory body (Companies House in the UK) so that any interested parties can
review them.

Some countries and/or industries have set up public oversight boards. These
organisations monitor whether organisations are complying with relevant rules and
regulations and take action against those that fail to meet the required standards.

2.10 Benefits of corporate governance to the organisation

Advantages include:

 business success – improved controls and decision-making will aid
corporate success as well as growth in revenues and profits.

 investor confidence – corporate governance will mean that
investors are more likely to trust that the company is being well run.
This will not only make it easier and cheaper for the company to
raise finance, but also has a positive effect on the share price.

 minimisation of wastage – strong corporate governance should help
to minimise waste within the organisations, as well as corruption,
risks and mismanagement.

 listing requirements – following corporate governance guidelines, is
required by many stock exchanges.

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