Nominations Committee Terms of Reference A framework terms of reference aligned to

King IV ™

Guidance for

Boards

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Technical Contributors to this Guidance Paper:

Tanya Nassif (IoDSA)

Mira Butler (IoDSA)

Vikeshni Vandayar (IoDSA)

Parmi Natesan (IoDSA)

Disclaimer

The information contained in this guidance paper is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although every endeavour is made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. The view and opinions contained in this guidance note are merely guidelines for information purposes only, and as such no action should be taken without first obtaining appropriate professional advice. The IoDSA shall not be liable for any loss or damage whether direct, indirect, and consequential or otherwise which may be suffered, arising from any cause in connection with anything done or not done pursuant to the information presented herein. All copyright in this paper subsists with the IoDSA, and extracts of this paper may only be reproduced with acknowledgement to the Institute of Directors in South Africa.

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Contents

Purpose ........................................................................................................................................................... 4

Nominations Committee Terms of Reference Framework ................................................................ 5

1. Introduction ..................................................................................................................................... 5

2. Purpose and objective for the Terms of Reference ....................................................... 5

3. Membership .................................................................................................................................... 5

4. Role and Responsibilities........................................................................................................... 6

5. Authority ........................................................................................................................................... 8

6. Meeting Procedures .................................................................................................................... 8

6.1. Frequency ................................................................................................................................... 8

6.2. Attendance .................................................................................................................................. 9

6.3. Agenda and Minutes ................................................................................................................. 9

6.4. Declaration of interests .......................................................................................................... 10

6.5. Quorum and Voting ................................................................................................................. 10

7. Evaluation ....................................................................................................................................... 11

8. Approval of the Terms of Reference ................................................................................... 11

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Purpose

In accordance with the King IV Report on Corporate Governance™ for South Africa 2016 1 the governing

body should consider allocating the oversight of the following to a dedicated committee, or adding it to

the responsibilities of another committee as is appropriate for the organisation.

the process for nominating, electing and appointing members of the governing body;

succession planning in respect of governing body members; and

evaluation of the performance of the governing body.

This General Guidance note is to provide guidance on what components/sections could be included in

such a committee for nominations (hereafter referred to as “nominations committee”) terms of reference

as per best practice recommendations, which also takes into account the recommendations of King IV.

This draft framework is intended to serve as guide to form the basis for the development of your

organisation’s specific terms of reference. Each organisation will need to give consideration to its specific

circumstances and requirements. In addition, the terms of reference must cover all duties or activities

which have been delegated to the committee by the Board (which duties can be more than that indicated

above or included in this draft framework).

1 King IV Report on Corporate Governance for South Africa 2016, Copyright and Trade marks are owned by the Institute of Directors in Southern Africa NPC, www.iodsa.co.za

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Guidance for Boards

Nominations Committee

Terms of Reference Framework

1. Introduction

The Nominations Committee (Committee) is constituted as a committee of the Governing Body (Board)

of the [NAME OF ORGANISATION] (Organisation). The Board acknowledges the need for Committee

terms of reference (“ToR”) as recommended in the King IV Report on Corporate Governance™ for South

Africa 2016 (“King IV™”).

The duties and responsibilities of the members of the Committee, as set out in this document, are in

addition to those duties and responsibilities that they have as members of the Board. The deliberations

of the Committee do not reduce the individual and collective responsibilities of Board members in regard

to their fiduciary duties and responsibilities - they must continue to exercise due care and judgement in

accordance with their legal obligations.

These ToR are subject to the provisions of the Companies Act No. 71 of 2008 ( “Companies Act”), the

organisation’s Memorandum of Incorporation (“MOI”), the Board Charter and any other applicable law or

regulation.

2. Purpose and objective for the Terms of Reference

The purpose of these ToR is to set out the Committee’s role and responsibilities as well as the

requirements for its membership, meetings and other procedures.

3. Membership

3.1. The Committee shall comprise of all non-executive members, with a majority being independent.

This composition is made up of _____ (include any specific individuals or positions that will ex-

officio result in that individual being a member of the committee where applicable)

________________________________.

Drafting Tip

The relevant documents or legislation that impact and govern the ToR can be provided for here. This

would commonly include the board charter and the Memorandum of Incorporation (MOI) or any other

governing document and applicable legislation that is referred to.

Drafting Tip

King IV recommends that the nominations committee should be made up of non-executive

members of the governing body and the majority should be independent.

In many instances organisation’s appoint the chair of the governing body to chair the

nominations committee (which is a recommended practice), the lead independent director and

the chairs of the other board committees to be make up the composition of this committee.

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3.2. Executive members may not be members of the Committee but may attend meetings as invitees.

3.3. The Committee shall be chaired by the Board Chair as an independent non-executive member.

3.4. The members of the Committee shall collectively have sufficient qualifications and experience to

fulfil their duties. The Committee members are required to keep up to date with developments

impacting their relevant skill set as well as the subject areas relevant to required skill set needed

on the Committee.

3.5. The board shall select the members of the Committee from its current members and as far as

possible in line with the composition and skills requirement as set out in Clause 3.4 above.

3.6. The Committee’s composition is reviewed annually by the Board. The Board fi lls vacancies on the

Committee within 40 (forty) business days after the vacancy arises.

4. Role and Responsibilities

4.1. The Committee has an independent role with direct accountability to the Board. The Committee

does and shall not assume the functions of management, which remain the responsibility of the

executive members, officers and other members of senior management.

4.2. The role of the Committee shall be to assist the Board with overseeing:

4.2.1. the appropriate composition of the Board for it to execute its duties effectively;

4.2.2. succession planning in respect of Board members, as well as for management;

4.2.3. the basis for re-election of Board members;

4.2.4. a process for nominating, electing and appointing members to the Board;

Drafting Tip

Where possible, list or include the specific criteria for members i.e. skills, qualifications,

knowledge etc. that will be required to help the committee fulfil its role and responsibilities.

Members should be required to ensure continuous professional development

Drafting Tip

The below is drafted to primarily align with King IV as well as with what we believe is best

practice. The roles and responsibilities may differ from organisation to organisation depending

on the committee whose responsibility nominations is delegated to.

King IV specifically provides that the nominations committee should have oversight of:

1. the process for nominating, electing and appointing members of the governing body;

2. succession planning in respect of governing body members; and

3. the evaluation of the performance of the governing body.

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4.2.5. the evaluation of the performance of the Board (including committees and individual

members); and

4.2.6. the induction and ongoing training and development of Board members.

4.3. In order for the Committee to achieve its oversight roles, it shall perform the following functions:

4.3.1. Ensure the establishment of a formal and transparent process for the nomination,

election and appointment of members, including before nominating a candidate:

a) considering the collective knowledge, skills and experience required by the Board ,

the suitable size of the Board, the diversity of the Board and whether the candidate

meets the appropriate fit and proper criteria;

b) conducting independent reference, qualification, criminal and other background

checks; and

c) requesting confirmation from candidates of any other professional

commitments/directorships held and considering whether they have sufficient time

available to fulfil the responsibilities required by the Board.

4.3.2. Recommend candidates to the Board for consideration to be put forward to the

[shareholders/members] at the Annual General Meeting for voting (selection) and

appointment.

4.3.3. Consider whether to recommend the re-election of non-executive members whose terms

are coming to end, based on the members’ performance and attendance on the Board

and committees.

4.3.4. Formalise the appointment of non-executive members through an agreement between

the Organisation and the non-executive member. (See General Guidance Note: NED

Agreements or Appointment Letters for further guidance)

4.3.5. Oversee the development and implementation of a formal induction programme for new

Board members.

4.3.6. Ensure that inexperienced Board members are developed through training or mentorship,

where considered necessary.

4.3.7. Oversee the development and implementation of continuous professional development

(CPD) programmes for the Board (which can include, inter alia, regular briefings on legal

and corporate governance developments, and risks and changes in the external

environment of the Organisation).

4.3.8. Consider and recommend to the Board targets in respect of gender and race

representation needed on the Board.

4.3.9. Oversee the annual performance assessment of the Board, Board committees and

individual non-executive members and making recommendations to the Board based on

the results of these assessments.

4.3.10. Identify and recommend to the Board a replacement/successor for the Chief Executive

Officer (“CEO”) as and when necessary.

4.3.11. Ensuring that appropriate succession plans are established, formalised and implemented

at Board level as well as executive and management level.

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5. Authority

5.1. The Committee shall act in accordance with the delegated authority of the Board as recorded in

these ToR and it shall have the power to investigate any activity within the scope of these ToR.

5.2. The Committee, in the fulfilment of its duties, may call upon other members, Company officers, the

Board Secretary or assurance providers to provide it with information, subject to a Board approved

process.

5.3. The Committee shall in addition have reasonable access to necessary Organisation records,

facilities, employees and any other resources necessary to discharge its duties and

responsibilities, subject to following a Board approved process.

5.4. The Committee may form, and delegate authority to, subcommittees, one or more designated

members of the Committee and/or to one or more members of the executive in relation to an

activity within its ambit in terms of this ToR.

5.5. The Committee shall have the right to obtain independent outside professional advice to assist

with the execution of its duties, at the Organisation’s cost, subject to a Board approved process

being followed.

6. Meeting Procedures

6.1. Frequency

The Committee shall hold sufficient scheduled meetings to discharge all its duties as set out in these

ToR but subject to a minimum of 2 (two) meetings per year.

Drafting Tip

The Board should decide and approve the process in which NEDs can access company

information, have access to executive and/or management or other applicable individuals as well

as independent professional advice when they need further information or advise. For example,

all requests must be made via the CEO or any other designated individual such as the company

secretary.

This approved process should either be referred to the applicable clause in the Board Charter

and/or reiterated here in this ToR.

Drafting Tip

There may be a prescribed minimum number of Nomination Committee meetings provided for in

the MOI or Board Charter or any other governing document and such specific requirements/

detail should be mirrored in these ToR.

Additional meetings, to that provided, may be called upon by the Chair or members of the

committee as and when necessary to enable the committee to discharge its duties and/or deal

with urgent matters that arise. The right to call for additional meetings as well as the process to

follow can be included in the ToR.

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6.2. Attendance

6.2.1. Representatives from assurance providers, professional advisors and management may

6.2.2.

6.2.3.

6.2.4.

6.2.5.

attend Committee meetings, at the discretion of the Chair, by invitation on ly and in such

instances shall not have a right to vote on matters before the Committee. In addition, the

Chair may request such invitees to leave the meeting at any time should there be matters

on the agenda that are confidential and to which they should not be privy to.

Any other member of the Board is entitled to attend the Committee meetings as an

observer.

Committee members shall attend all scheduled meetings of the Committee, including

meetings called on an ad hoc basis for special matters, unless prior apology, with

reasons, has been submitted to the Chair or Board Secretary.

Committee members may attend meetings in person or via electronic means.

If the elected Chair of the Committee is absent from a meeting, the members present shall

elect a member amongst them to act as Chair for that meeting.

6.3. Agenda and Minutes

6.3.1. The Committee shall establish an annual work plan for each year to ensure that all

relevant matters are covered by the agenda of the meetings planned for the year.

6.3.2. A detailed agenda together with supporting documentation, shall be circulated, at least

________ days/weeks prior to each scheduled meeting to the members of the Committee

and other invitees (where applicable).

6.3.3. Committee members are required to be fully prepared for Committee meetings in order to

be able to provide appropriate and constructive input on matters for discussion.

6.3.4. The minutes of meetings shall be completed as soon as possible after the meeting and

circulated to the Chair for review thereof. The minutes must be formally approved by the

Committee at its next scheduled meeting or via email communication.

6.3.5. Minutes of the meeting signed by the Chair are sufficient evidence that the matters

referred to therein have been fully discussed and agreed, whether by way of a formal

meeting or otherwise.

Drafting Tip

Notice of Committee meetings as well as meeting packs may be provided for in the

organisation’s MOI or other governing document, in which instance, such specific requirements

should be mirrored in these ToR.

Specific timelines for actions can be included in the ToR in respect to any provision which

require a deliverable/action for example in respect to the annual work plan (which is usually

done before the commencement of new calendar/financial year), notice of apologies for non -

attendance at meetings, minutes of meetings etc.

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6.4. Declaration of interests

6.4.1. At the commencement of each meeting, all Committee members should declare whether

they have any conflict of interest in respect of any matter on the agenda.

6.4.2. Such conflict should be recorded in the minutes and conflict of interest register (where

applicable).

6.4.3. The Committee should discuss the conflict and decide upon its severity, impact and

determine the appropriate management of such.

6.4.4. Depending on the outcome of Clause Error! Reference source not found.,, when that

agenda item arises the member should be recused from the meeting for the duration of

that matter being discussed.

6.5. Quorum and Voting

6.5.1. The required quorum for meetings shall be [___indicated whether majority (50% plus 1),

or a specific number of members__].

6.5.2. Individuals in attendance at Committee meetings by invitation may participate in

discussions but do not form part of the quorum for Committee meetings.

6.5.3. A quorum shall be required in order for any decision or resolution to be made at a

meeting or otherwise.

6.5.4. If there is no quorum at a meeting, its members may proceed with the meeting to discuss

items on the agenda without making any decisions on such items, or may postpone the

meeting to an agreed alternative date and time.

6.5.5. Each committee member shall have 1 (one) vote.

Drafting Tip

All members as part of the governing body should declare all personal and financial interest

annually and at every meeting. Members have a responsibility to update the Board, Commit tee

and/or company secretary to any changes in his/her conflicts of interest.

See the King IV Practice Note for further guidance:

- King IV Practice Note: Independence of Governing Body Members

- King IV Practice Note: The role of the chair and lead independent

- King IV Practice Note: Declaration of Interests

Drafting Tip

Quorum for the governing body meetings may also be provided for in the organisat ion’s MOI or

governing document, in such instance, that specific detail/requirement should be mirrored in

these ToR.

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7. Evaluation

The Committee shall perform a self-evaluation of its effectiveness every year and shall report the results

thereof to the Board. The Board may elect to conduct an independent evaluation of the Committee’s

performance.

8. Approval of the Terms of Reference

These ToR were approved by the Board on [insert date] and will be due for review annually.

__________________________________

Chair of the Board

Drafting Tip

Some MOIs and/or other governing documents may provide the chair with a casting or second

vote. It is however not recommended best practice to give the chair a casting or second vote, as

no one individual on the board should hold ultimate power over decision making. The board as a

collective should make decisions and decisions should be made based on the majority or

unanimous view of members. If the board is split, it should further investigate and/or discuss the

matter to reach at least a majority consensus.

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