Very few people understand how a corporate boardroom works. Many assume a corporation simply promotes from within by choosing its own board members; however, this is not the case in the majority of corporations, especially when those corporations are accountable to shareholders.
In this article, we’ll explain the board nomination process and what happens when a person wants to decline a nomination–we’ll also discuss how systems like ElectionBuddy can make online voting a breeze.
First, let's look at the difference between a nomination and an election. ‘Nominated’ means a person is chosen as a potential board member, and ‘elected’ means they have won the election by receiving the most votes.
There are a number of ways corporate board members are nominated.
Many corporate rules or bylaws will state that either a nominating committee made up of senior board members or a third party is responsible for choosing nominees for board seats. A nominating committee should seek recommendations for new board members from other board members as well as from directors or members of management.
Once a nominating committee has examined all potential candidates, it will nominate several people, typically several more nominees than there are board seats to be filled.
Open nomination is a process in which anyone who is eligible may be nominated for a board seat either by a current board member or a major shareholder. This process is also known as taking nominations from the floor, as it is practiced at shareholder meetings when nominations and votes may be open to the floor depending on the company's rules and bylaws.
Voting is typically conducted by shareholders after being presented with the list of candidates or nominees alongside how many board seats are available. Shareholders will then cast their votes for candidates by ranking them in order of preference. If their top-chosen candidate does not receive enough votes, their second-choice candidate is chosen, and so on–this is done until all seats are filled.
Alternatively, a company may use a system known as cumulative voting, in which voters are given a number of votes and may distribute them among candidates however they choose. In this system, candidates with the highest number of votes are elected to the board.
Ideally, the company’s bylaws will have a mechanism that requires the nominating committee to consult with potential nominees to ensure that if they are officially nominated and elected, they will serve. This step negates the necessity of declining a nomination, as all potential nominees have agreed in advance that they will accept the nomination.
However, in cases in which these rules do not exist or an open nomination takes place and a candidate does not wish to be nominated, a future board member can withdraw from the nomination process and notify the board of their intention.
In the ideal scenario, this candidate is simply removed from the ballot and another nominee is chosen, but in situations in which ballots have already been sent to voters or there is the possibility of a write-in candidate, a person may be elected against his or her will. They can refuse to serve, in which case another election must be held for that board seat.
Easy-to-use online systems such as ElectionBuddy make nomination, voter notification, and the election process as painless as possible. With a variety of service tiers, from self-administered simple elections to complex multiple-winner elections across large areas, ElectionBuddy’s Election Experts are ready to assist with all your election needs.
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