7.3.3.2 Appointment of NEDs

The appointment of NEDs is dominated by the general meeting and the board itself. No other corporate organs are involved in this process. The general meeting appoints the directors – executive directors as well as NEDs – by a simple majority, but the articles of association may require a higher majority or even unanimity. The power of the shareholders can be weakened by requiring a higher majority. The nomination committee nominates candidates, which may be appointed by the general meeting. A weak point of the nomination committee is the possibility to include the CEO or other executive directors on this board committee. Although a majority of the committee has to consist of independent NEDs, a dominant CEO might obtain the upper hand in the nomination procedure and select his own board and independent NEDs. This is not good corporate governance practice and should be reconsidered. The articles of association may also provide that the board itself appoints its members, which is especially useful to fill vacancies that have risen unexpectedly.