News October 2015 FRC seeks feedback on board succession planning

FRC seeks feedback on board succession planning

27 October 2015

PN 60/15

The FRC today publishes a discussion paper – ‘UK Board Succession Planning’ – which seeks views on board succession for both executives and non-executives in order to support a suitably talented, diverse ‘pipeline’ of directors ready to serve on the boards of UK listed companies.

The FRC has developed its initial thinking through discussions with a wide range of interested parties – both individually and in groups – and now wishes to promote a shared understanding of the key issues and good practice.  

Issues explored in the paper include:

  • how effective board succession planning is important to business strategy and culture;

  • the role of the nomination committee;

  • board evaluation and its contribution to board succession;

  • identifying the internal and external ‘pipeline’ for executive and non-executive directors;

  • ensuring diversity; and

  • the role of institutional investors.

Director of Corporate Governance, David Styles commented:

"Boards which plan effectively for both executive and non-executive positions are more likely to achieve the right mix of diverse skills and experience needed for future prosperity and growth. Feedback on this discussion paper will offer us further valuable insights into issues around board succession."

The FRC is seeking to provoke discussion, and welcomes feedback on the approach and to the issues and questions posed. Comments are requested to be submitted by 29 January 2016.

Notes to editors:

  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

  2. The FRC’s interest stems primarily from the fact that the quality of succession planning is one of the most frequent issues highlighted as a consequence of board evaluation. Stakeholders have suggested that the FRC promotes good practice to raise quality.  The FRC also wishes to address the Parliamentary Commission on Banking Standards’ recommendations to the FRC on issues around director nomination, which commented that there was a ‘widespread perception that some “natural challengers” are sifted out by the nomination process.  The nomination process greatly influences the behaviour of non-executive directors and their board careers.’