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The first honorary degree was awarded to Lionel Woodville [1] in the 1470s by the University of Oxford, he later became Bishop of Salisbury.
Honorary degrees are usually awarded at regular graduation ceremonies, at which the recipients are often required to make a speech of acceptance before the assembled faculty and graduates, which often forming a highlight of the ceremony. Generally universities nominate several persons each year for consideration of the award, these usually go through several committees before approval may be made. Those who are nominated are generally not told until a formal approval and invitiation are made; often it is perceived that the system is shrouded in secrecy, and occassionally seen as political and controversial - in recent years the trend has been to award popular icons rather than scientists and scholars.
Some universities, however, also have the custom of awarding an honorary master's degree to every scholar it appoints as a full professor who had never earned a degree there, as a way of co-opting him or her as an alumnus.
An ad eundem degree may also be considered a sort of honorary degree.