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A study of the incidence and independence of nomination committees

Author

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  • Suwina Cheng
  • Bruce A. Rayton

Abstract

The purpose of this study is to understand the factors influencing the adoption and independence of nomination committees. Previous literature identifies potential substitutability and complementarity between corporate governance arrangements that may be beneficial from the perspective of outsiders (e.g., Rediker and Seth, 1995), but our work suggests that similar complementarities may be identified from the perspective of firm insiders. Probit analysis of data from the annual reports of UK public companies from 1998 through 2002 reveals that the shareholdings of substantial shareholders are positively related to the selection of non-executive members to the nomination committee, but that these shareholdings are negatively related to the use of nomination committees in the first place. Coupled with the participation of over 40% of UK CEOs on the appointment committees of their own firms, these results suggest that some appointment committees are used to limit the influence of substantial shareholders on future board appointments.

Suggested Citation

  • Suwina Cheng & Bruce A. Rayton, 2012. "A study of the incidence and independence of nomination committees," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 3(1), pages 84-104.
    • Handle: RePEc:ids:ijcgov:v:3:y:2012:i:1:p:84-104
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