The Nomination and Remuneration Committee (NRC) plays a pivotal role in the composition of the Board and of the leadership of a company. It also plays an essential role in influencing the culture of a company. It ensures that the right persons occupy the right positions, and that their performance and pay are aligned with long-term value creation.

However, a well-functioning NRC’s role goes beyond appointments and compensation. It builds the company of the future. It steers succession planning, promotes diversity, and helps build a leadership pipeline that reflects the company’s strategic vision and future needs.

In today’s corporate governance landscape, the NRC is no longer a committee to tick a box. Yet, in many companies, its role remains undervalued. 

What Makes an effective NRC?

To fulfil its mandate effectively, the composition and independence of the NRC are key. Law and regulations require that a majority of NRC members be Independent Directors (IDs), with an Independent Chair leading deliberations. Many well governed companies have gone further, creating NRCs comprising only IDs, ensuring objective decision-making on items such as appointment of Board members and key personnel, and their compensation. 

Excellence Enablers recently published its 6th Annual Corporate Governance Survey, focussing on top 100 companies of India. 

The Survey revealed

Composition: While all companies were compliant with legal prescriptions on composition, 24 companies went a step further to have only IDs comprising their NRCs for 4 consecutive years, with the number being 36 for FY25. 

Presence of Board Chair: Law and regulations respect the fact that the Chair of the Board may want to be a part of key appointment and compensation related decisions in order to provide experience-based insights. Accordingly, it allows the Board Chair to be a member of the committee. In FY 25, 45 companies had Board Chairs being members of NRC, with 36 companies following this practice for the previous 4 FYs. 

Meeting frequency: While the law mandates one meeting annually, in FY25, 66 companies have had more than 4 meetings annually, with the highest number being 17. Only 9 companies met once. It is heartening to see that the committee’s role is increasingly getting noticed. 

Attendance: Showing commitment to their work, 90.26% of NRC members had full attendance in FY25. Happily, this trend has increased year on year. 

The effective NRCs are playing proactive roles in appointment, compensation, succession planning and Board evaluation. 

Explore corporate governance practices being followed by NIFTY 100 companies in our 6th Edition of Corporate Governance Survey.