The Board Committee Series | Part 3: The Nominations and Remuneration Committee

This is Part 3 of a four-part series on core board committees. Parts 1 and 2 covered the Audit and Risk Committees. The full series, along with our foundational article on Terms of Reference, is here.

If the Audit Committee is the board's most technically demanding committee, the Nominations and Remuneration Committee is its most politically sensitive.

It decides who joins the board. It evaluates whether current directors are performing. It determines how much the CEO is paid and on what basis. It oversees succession at the very top of the organization. These decisions directly shape the organization's leadership, culture, and long-term direction.

And yet, in many Kenyan organizations, this committee is either absent entirely, or so close to the board chair or founder that its independence is theoretical rather than real. That gap creates some of the most consequential governance failures an organization can experience. That is, boards that never refresh, executives who are paid without accountability, and leadership pipelines that exist only on paper.

Two Mandates, One Committee

1. The Nominations Mandate

The nominations function is responsible for ensuring the board has the composition it needs to govern effectively, now and into the future.

This begins with board composition planning. The committee maintains an ongoing view of the board's current skills, experience, independence profile, and diversity, benchmarks this against the organization's strategic needs, and identifies the gaps that future appointments should address.

It extends to the recruitment process itself: defining the candidate profile, overseeing the search, assessing candidates against the competency framework, and recommending appointments to the full board. The CMA Code explicitly provides that the chairperson of the nomination committee shall be an independent director

The nominations function also covers director induction, ongoing development, and performance evaluation including the annual board evaluation process that both the CMA Code and the Mwongozo Code increasingly expect of Kenyan boards.

2. The Remuneration Mandate

The remuneration function sets and oversees the framework within which executive leadership is compensated. This covers the CEO's pay structure, performance targets and evaluation, incentive arrangements, and termination terms. For listed companies and regulated entities, it also covers the remuneration policy for senior management more broadly.

The central governance principle is that executive remuneration must be linked to performance and that the performance metrics used must reflect the organization's actual strategic priorities, not just the metrics that are easiest to hit. In 2026, this increasingly means incorporating non-financial metrics into remuneration frameworks like ESG performance, governance scores, workforce stability, and customer outcomes.

Kenya's Salaries and Remuneration Commission gazetted new regulations in June 2026 (Legal Notice No. 106), operationalizing the SRC Act and setting clearer frameworks for remuneration governance in public institutions. While these apply directly to state and public officers, they signal a broader regulatory direction toward greater transparency and accountability in how organizations determine and disclose executive pay.

Composition of The Committee

The Nominations and Remuneration Committee must be composed predominantly of independent non-executive directors.

The committee should have access to independent remuneration benchmarking data, external legal advice on director duties, and independent search support for board appointments, without routing any of these through management.

Common Failures That Create Real Risk

· Board appointments made through personal networks without a competency framework or structured process - produces boards that lack the independence to challenge effectively

· Remuneration packages set without performance conditions - or with performance conditions so loosely defined that they are met regardless of actual organizational performance

· A committee chaired by the board chair who is also closely connected to the CEO. This removes the independence the committee exists to provide

· No formal board evaluation - meaning the committee has no objective basis for assessing whether current directors are contributing effectively or whether renewal is needed

· Succession planning treated as a future agenda item - rather than an ongoing committee responsibility with a current plan and annual review

What the TOR Must Cover

A Nominations and Remuneration Committee TOR must address both mandates explicitly and separately, even when combined in one committee. Key provisions include:

1. The competency framework the committee uses to assess board composition needs

2. The process and independence requirements for board candidate searches

3. The criteria and process for annual director performance evaluation

4. The remuneration philosophy - the principles governing how executive pay is structured and linked to performance

5. The committee's authority to engage independent remuneration advisors without management's involvement

6. The process for reviewing and disclosing the remuneration of directors and senior executives

The Committee That Shapes Everything Else

Every other committee depends on the Nominations and Remuneration Committee doing its job well. The Audit Committee's effectiveness depends on having a financially expert, independent chair. The Risk Committee's credibility depends on having directors with relevant risk experience. The Governance Committee's authority depends on a board composition that is genuinely diverse and independent.

Get the nominations and remuneration function right, and the rest of the board's governance infrastructure has the human foundation it needs. Get it wrong, and no amount of committee structure will compensate for a board that was never built to govern.

Next week: The Board Committee Series | Part 4: The Governance Committee — the committee that oversees the board itself.

For support establishing or reviewing your Nominations and Remuneration Committee's structure and Terms of Reference, Azali CPS provides governance advisory services across Africa. admin@azali.co.ke | +254 707 456 140