The nomination committee in the corporate governance of Maltese listed companies

Abstract

Purpose: This study aims to ascertain and assess the regulatory framework, roles, status and effectiveness of the Nomination Committee in Maltese listed companies. Despite playing a significant role in the corporate governance of such companies, the Nomination Committee has not been given sufficient attention, nor has it been subject to ample research. Design: A predominantly qualitative mixed methodology was employed to achieve the objectives of the study. A total of 25 semi-structured interviews with financial analysts, MFSA representatives, audit firm representatives, company officers and company directors were carried out. Findings: This study found that in Maltese listed companies, the Nomination Committee has been relatively less adopted than other committees. There is a particular lack of insistence on the part of the MFSA, as well as substantial resistance from listed companies, with regard to the adoption of this committee. Such outcome is primarily owing to the Nomination Committee not being mandatory, the dominance by the controlling shareholder/s in most Maltese listed companies, and the requirement for the said committee to be composed entirely of Board members. Additionally, where such a committee exists, it rarely performs all of its recommended roles, betraying an apparent gap between the roles envisaged for it by the interviewees and the roles it actually plays. Its status is also not clearly defined, which calls for the issue of better guidelines. Overall, companies with hands-on experience on this committee have found it effective per se and for the purpose of good corporate governance practice. However, it was also found that for such a committee to be adopted and become more effective, both its appointment and the participation of independent outside consultants on the said committee need to be made mandatory. Conclusions: The Nomination Committee is as yet not well established among Maltese listed companies. Regulations need to go much further to ensure its adoption as well as its effectiveness in Malta. Value: It is hoped that this study will contribute towards fostering more awareness about the Nomination Committee and the corporate governance of Maltese listed companies. Additionally, this study may encourage the further development of the committee concerned, with particular emphasis being placed on the various recommendations made.