Many corporations have offices in multiple locations with members of their boards of directors living across the country or even abroad. As their schedules are usually jam-packed, gathering everyone each week or on a monthly basis can be very challenging. That’s why it makes sense to keep a standing committee to make decisions between board meetings.
This standing committee is also known as the executive committee. Though formed of senior board executives, the committee must report to the board and follow specific best practices to ensure efficient operations. Read on to discover how to maximize the value an executive committee can bring to your organization.
What is an executive committee?
An executive committee is a permanent body working in close partnership with the CEO or Executive Director. Elected by the board from among its members, it can get together on short notice and has the power to act urgently on behalf of the board to resolve crises.
The list of committee members usually includes the following positions:
- The chairperson
- The vice-chairperson
- The secretary
- The treasurer
- The heads of other standing committees and ad hoc task groups
The size of the executive committee usually depends on the scope of its responsibilities and the size of the organization itself. The outcomes of the executive committee meetings should always be structured as minutes and submitted to the full board of directors for assessment and approval.
Primary responsibilities of an executive committee
An executive committee acts according to the corporate bylaws to maximize the efficiency of daily operations. Here’s just a brief rundown of its duties, as every committee will have different responsibilities, depending on the company’s industry and needs.
- Providing organizational direction for the full board and the CEO. The CEO can resolve a range of daily issues; some duties can be covered by ad hoc task groups and standing committees; some can be handled by the executive committee, while certain decisions require the attention of the full board. The committee should decide which is which to prepare the agenda for board meetings.
- Evaluating C-level executives’ performance. The board hires C-suite to perform specific duties and achieve certain goals. The executive committee can oversee how they fulfill these obligations to ensure the company resources are well-spent. This is needed to review the executive’s compensation and adjust it accordingly.
- Nominating and selecting board members. Board members might quit or retire, or circumstances might require increasing the size of the board. Through daily interaction with various managers, the executive committee can shortlist candidates for the board and submit them for approval at the next board meeting.
- Advising the CEO and executing the board’s power between meetings. The CEO has lots of tasks to perform and decisions to make. Having a tightly knit group of experts working closely with the CEO helps achieve better operational agility and crisis management capabilities.
- Emergency decision-making. Business decisions are usually made after thorough consideration and all-around discussion, but sometimes decision-making needs to be urgent. In emergency situations, the executive committee can act immediately and let the full board judge later if their actions were necessary, correct, or justified.
- Offering training and professional development for executives. You need leaders to steer the organization in the right direction. And since leaders are made, not born. Board members should always have some new horizons to strive for, as otherwise, they might turn into mere hands raised for approval. The committee can oversee individual training programs for board members to ensure that the leadership can lead.
Some of these tasks are continuous, some are periodic, and some have to be done only a couple of times a year. So, how often the executive committee meets is dictated by the company’s business needs. Once a quarter or several times a week, or perhaps on an ad hoc basis — that’s for the company to decide considering the functions of its executive committee.
But remember: there are some things an executive committee should never be allowed to do:
- Amend bylaws. Any change to the bylaws must be brought to the attention of the full board of directors and approved by them. Otherwise, too much power may be concentrated in the hands of a few people.
- Elect or remove board members. Such decisions must be made by the full board only.
- Hire or dismiss C-level executives. The grounds for such a move have to be presented to the full board and approved by them.
- Change the budget. It’s up to the full board to plan or adjust the budget, as these decisions affect the entire company. It might be tempting to leave this to the head of finance, doubling as the treasurer and serving on the executive committee, but this might have undesirable consequences in the long run.
- Change the company structure. Pursuing a merger or acquisition, setting up a new department, reorganizing the existing structure, or closing the company down — any of these decisions require the attention of the full board of directors.
Summing up, an executive committee can be a very influential tool for streamlining the workflows of your organization. However, establishing an executive committee just for the sake of doing so is not recommended. You should first double-check that its future roles and responsibilities are crystal clear and that it’s fully equipped to address the issues arising in the company.
How to maximize the efficiency of an executive committee
Suppose you created an executive committee, and it’s been working very well — until it wasn’t. What should you do if you realize that board meetings turned into a mere formality, the executive committee became a closed clique, and the rest of the board feel undervalued and don’t contribute as much as they should have? Below are five common-sense steps every organization should take to increase the efficiency of its executive committee activities:
- Start with an open-hearted discussion. Talk with the CEO, the committee, and the full board of directors. Do the board members feel deeply involved in the company matters, or did they allow the executive committee to turn into an elitist clique that can’t be removed from power? In that case, it’s time to rebuild the board structure and replace the committee (if you still have the power to do this, of course…).
- Discuss the structure rebuild during the next meeting. Discuss what every board member thinks the committee should be doing and whether it currently does what it should. Such conversations help uncover the reasons behind the irritation or inaction of board members, as well as resolve any potential conflicts.
- Analyze your bylaws. Let’s be honest, how many times have you read your company bylaws? Perhaps, there is a clause that prohibits anyone but the senior officers from serving on the executive committee? Or, maybe, their demands undermine the efficient operations of your departments?
- Eat an elephant one bite at a time. Try to increase the board size, if possible, and add fresh blood from the managerial corps. These new members will bring new ideas to the table and help get the company moving in the right direction. If anything, this might give you enough votes to remove the all too powerful executive committee members.
- Take clear notes of what every board member is doing. This serves many purposes at once, from monitoring the work progress in particular task forces to highlighting the impact of this or that board member who’s zealously fulfilling — or neglecting — their duties. Reading through the executive committee meeting minutes is also more preferable to endless email exchanges.
The last point is where the technology comes in. Board meeting management software is a must-have instrument that keeps all the board’s documents organized, supports transparent discussions, ensures compliance with bylaws, and enables swift decision-making when needed.
In the new reality of remote work, it’s essential to implement such software to ensure that no important details are overlooked, every board decision is followed through by all members, and the board can easily communicate wherever and whenever the need arises. Additionally, it allows the company to store and share important documents securely.