Board committees represent an essential part of the corporate governance process and should have clear reporting procedures and scope. Board committees must have more than simply vague objectives, and committee meetings should be well controlled.
This Lexicon guide will review the role of board committees, their duties, and the benefits of having such committees in place.
What are board committees?
The board can appoint committees based on its objectives for the year, and these committees can help review and advise on the achievement of those objectives. The committee structure should be reviewed regularly to make sure there are no overlapping responsibilities.
There can also be standing committees, which operate on a more permanent basis, and ad-hoc committees, which are in place for a particular time frame and can then be disbanded once an objective has been achieved. Ad-hoc committees could also be termed task forces. Committee chairs can provide leadership to the committee and help translate the board’s goals into an agenda for committee meetings.
Examples of the types of committees which might be set up include finance committees, communications committees, audit committees, governance committees (which focus on recruitment and board management) and membership committees.
Why have committees?
The board can accomplish much of the work through committees, which is an effective way to delegate work. They can focus specifically on areas such as governance, internal affairs, or external affairs.
Committee size will depend on the board’s needs, and it is helpful to recognise that the more committees you set up, the more meetings will need to take place.
Committee members should be selected based on their experience and skills. Each board member should serve on at least one committee, but preferably no more than two.
Essentially, a committee provides expert advice and counselling to the board. However, the committee’s suggestions still need to be approved by the board, and they are not obligated to go with this advice.
What does an effective committee look like?
The main characteristics of an effective board committee should be that it:
- Has a clear purpose and goals
- Has a chairperson
- Is aligned with the board, and its members understand the time commitment involved
- Understands its role is an advisory one and that it doesn’t make decisions
- Has an evaluation process
Some organisations operate a zero-based committee structure which means that each year is started with a clean slate, and new committees are created only as needed. This avoids stagnation and ensures that unnecessary committees are dissolved.
Some boards may find that no committees are necessary and that tasks can be effectively delegated to individual board members; however, this would take a lot of commitment from every board member.
What are the main benefits of having board committees?
Today, one of the most sensitive issues involves directors’ remuneration, and a committee focusing on this area would be considered an essential element of good governance.
In general, committees bring in different opinions and viewpoints, improve communication, and reduce workload.