Should nomination committees be board sub-committees or shareholders’ committees. Views of different interest parties

Abstract

Nomination Committees have recently emerged in the context of corporate governance, both in Iceland and other countries; most Icelandic-listed firms have now established them. There are different academic and business world opinions on the committees’ rationale, practices, and structure. The committees are operated in different ways within Nordic corporate governance norms, i.e., they are either directly subordinate to shareholders or appointed as board subcommittees. Previous research on nomination committees show that their existence can positively affect corporate governance, and that their work can lead to a better process for appointing directors. The committees have not been examined in Iceland before and this research aims to document original insight into their organization. Interviews were conducted with thirteen individuals who are shareholders, board members of listed companies, or committee members. In addition, a questionnaire was sent to shareholders, board members, nomination committee members of the 300 largest companies in Iceland. The findings show that nomination committees in Iceland should be shareholders’ committees instead of board sub-committees. Shareholders should also elect the committee members at shareholders’ meetings. The results can benefit shareholders and boards when establishing and organizing nomination committees.