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What are board committees?
What are board committees? A brief governance explainer with some key examples of common committees and the jobs they do.
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What are board committees?
A board committee is essentially a sub-team within a board of directors, designed to help the wider board achieve its objectives.
Board committees are intended to split key boardroom responsibilities among the most relevant directors (and other personnel when required). They are given specific tasks, which they then take, debate, and make a final recommendation on for a wider board decision.
What’s the difference between a standing board committee and an ad-hoc board committee?
It’s all about permanence. Standing committees are ones which last through the years because their function is so essential to the continuing health of the business. Meanwhile, ad-hoc committees are more temporary. They are set up in response to a specific issue that may not always require attention, but does in the current moment.
Although business priorities evolve over time, boards tend to stick with the same standing committees. They are more likely to expand or limit the remit of those committees than they are to get rid/revamp them entirely, or create new ones. For example, Harvard research from 2022 found that 86% of public boards didn’t add a new standing committee in the recent past, nor did they plan to. However, the same survey found that 55% had expanded the remit of at least one committee in the same period.
You can see some common examples of standing committees and ad-hoc committees below.
What are some common standing board committees, and what do they do?
Bear in mind that the examples below are by no means exhaustive. Your company may well have a dedicated committee for a particular issue that’s only relevant in your space. Ultimately, it’s important for any board to have the flexibility to form committees based on their needs.
Committee name | Committee responsibility |
|---|---|
| Finance committee | To ensure the company’s continuing financial health. |
| Audit committee | To provide independent and laser-focused oversight of financial statements. |
| Remunerations/compensation committee | To determine pay packages, bonuses and other options for top executives. |
| Governance/nominations committee | To oversee succession planning and find/recruit new board member candidates. |
| Risk committee | To identify and oversee the company’s preparedness for key risks. |
What are some common ad-hoc board committees, and what do they do?
Committee name | Committee responsibility |
|---|---|
| Executive search committee | To specifically find and recruit a new CEO, especially in the event of a sudden departure. |
| Merger and acquisition committee | To conduct due diligence on any potential merger or corporate buy-out. |
| Crisis response committee | Any kind of crisis, such as war, a pandemic, a scandal, or a financial emergency, can cause this kind of committee to be established. |
| Relocation committee | To evaluate the risks and benefits when discussions arise over a company moving its headquarters or area of operations. |
Why have board committees?
Board committees are an effective way to delegate work. They can focus specifically on areas such as governance, internal affairs, or external affairs and, what’s more, they can include only the directors who have the most expertise in this area. It’s a “divide and conquer” approach.
Do board committees make final decisions, or just recommendations?
Normally, board committees only make recommendations based on their detailed analysis and deliberation. The final decision rests with the board as a whole, which must vote on the recommendation.
However, some boards may delegate decision-making powers to committees in limited circumstances. Keep in mind, this should only be done for a specific decision and in accordance with the company’s bylaws.
Can non-board members sit on board committees?
In general, yes. Many committees will actively encourage this because it helps them in their deliberation. For example, an audit committee might bring in an external accountant, or a cyber and tech committee might bring in an experienced consultant.
The crucial task in these cases is defining what abilities this non-board member will have. Your company bylaws should always be consulted first. Following that, you should be clear on what voting power, if any, this external appointment has. Generally, non-board members participate in committee discussions but do not vote at the end, especially if the committee itself has binding decision-making power in a certain area.
What does an effective board 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.
References
- What is a board of directors?
- Standing Board Committee definition
- Back to Basics: Board Committees
- The role of board committees in corporate governance
- What is an audit committee?
- What is a remuneration committee?
- What is a nominations committee?
- Most Commonly Asked Questions About Board Committees
- The Role of Corporate Bylaws in Business Operations
- Nonprofit Boards & Bylaws Part VI: About Committees
- What questions should I ask as a board member?
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