This is an excerpt of Steinecke Maciura LeBlanc’s “Governance for Regulators” handbook. To view additional sections of the handbook, click here.
4. Selection of Board, Committees and Staff
The criteria and process for selecting Board, committee and staff members has a huge impact on how the organization operates. For example, where the vast majority of Board members are elected by the profession, they will bring the perspective of the profession to the regulator. Often they will have some sense of representing the people who elected them. They may have limited experience in participating in public interest regulation, strategic planning for a regulatory organization, risk management, policy making or organizational oversight.
Similarly, where the majority of positions on committees are filled by Board members, the pool of available candidates limits the ability to apply a merit-based selection processes. In addition, the interpersonal relationships of Board members likely have an impact on the committee selection process that might not be present if committee members are selected from outside of the Board through an objective, skills and experience-based process.
There has been a trend around the world in recent years to move away from electing Board members to appointing Board members though a recruitment process with the assistance of neutral experts in human resources hiring following a structured process of reviewing the experience, skills and aptitude of applicants. The starting point and underlying assumptions for Board members selected in this way is generally quite different from that of Board members who are elected by the profession. A similar trend is to use a similar process for selecting individuals who are not Board members to serve on regulatory committees.
The selection of Board and committee members is often prescribed by the regulator’s enabling legislation. Thus while some changes can be made by the regulator on its own (e.g., inserting a structured nominating process into the Board selection or committee appointment processes), fundamental changes usually require legislative amendment.
Most regulators use a formal recruitment process, with expert assistance, in selecting the CEO of the organization. Generally the CEO and, in larger regulators, human resources staff, recruit other employees with no participation by the Board.
The following scenario illustrates the possible impact on governance of the Board selection process.
Board Selection Scenario
The regulator for parachute clubs is transitioning from electing its Board members to selecting them through a merit-based process. The current Board has both types of Board members on it. During the strategic planning process a future trend is identified that independent local “jump clubs” are being replaced by large franchise operations that advertise heavily and operate on a transactional (per jump) fee basis rather than an annual dues basis. The elected Board members encourage the regulator to resist this change because of its widespread opposition within the profession, because it will fundamentally alter the social support nature of the local clubs and because it may pose a danger by enticing “newbies” to jump without adequate training and supervision. The recruited Board members indicate that the only relevant consideration is safety. They are unwilling to accept simply based on intuition that the franchise model is inherently more dangerous. The recruited Board members also insist upon undertaking research as to whether there are safety concerns and, if there are, whether they can be adequately addressed by suitable regulatory measures rather than outright prohibition of the franchise model.
It is essential that elected Board members do not fall into the misapprehension that they represent “constituents”. The election process is intended only to ensure that practitioners have confidence in the people regulating them. Once elected, professional Board members are required to only act in the public interest mandate of the regulator.