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12.5 Nominating Committees

New NYSE and SEC rules stipulate that

  • a listed company must have a nominating and corporate governance committee composed entirely of independent directors;
  • the nominating and corporate governance committee must have a charter that addresses the committee’s purpose and sets forth the goals and responsibilities of the committee.

Nominating new board members is one of the board’s most important functions. It is the responsibility of the nominating committee to nominate individuals to serve on the company’s board of directors. Placing this responsibility in the hands of an independent nominating committee increases the likelihood that chosen individuals will be more willing to act as advocates for the shareholders and other stakeholders and be less beholden to management.