The position of the executive committee is gaining more importance among companies. According to a Spencer Stuart research study, more than 130 companies with a market capitalization of $500 million or more have appointed an executive chair to their executive committee. This trend is increasing, with a 50% growth from 2010 to 2019.
In this article, we explain the concept and roles of the executive committee, its responsibilities, and its functions. We also investigate the nonprofit executive committee’s roles and purpose.
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What is an executive committee?
An executive committee, also referred to as a standing committee, is a governing body working in close partnership with the member states as CEO or executive director. The committee, elected by board members for three years, can convene quickly and act urgently to resolve a crisis on behalf of the board.
As a rule, the list of the executive committee of the board includes the following positions:
- Chair or president
- The leaders of other standing committees and temporary task groups
The number of representatives on a chair typically correlates with their duties and the organization’s size. The frequency of committee meetings, led by committee chairs and overseen by the board chair or present president, can range from quarterly to monthly.
Senior leaders, such as the president, past president, chair, past chair, and officers representatives, bring a wealth of experience to the table.
Executive committee vs. board of directors
Based on the roles and responsibilities often associated with the executive committee and the board of directors, it is vital to understand the differences and similarities between the two.
Definition and purpose of the executive committee
The executive committee typically consists of the CEO, CFO, COO, and other top executives. Its main purpose is to handle urgent matters that require consideration outside of regular board meetings.
Executive committee purposes include the following:
- Strategic execution. It Implements the board’s strategies.
- Handling urgent decisions. The committee acts swiftly in urgent situations.
- Advising top management. The board provides insight and support to executives.
- Managing daily operations. It oversees daily functioning.
- Compliance and monitoring. The committee ensures alignment with policies and regulations.
While committee members have an array of responsibilities that go beyond purely operational functions, their powers are often defined by the organization’s bylaws. For example, they can’t overrule decisions made by the full board.
Definition and purpose of a board of directors
The board of directors is the governing body that the shareholders elect. Its purpose is to oversee the organization’s overall direction and strategy.
The executive board positions and responsibilities include:
- Strategic oversight. The directors define the organization’s long-term goals, mission, and vision, ensuring strategic alignment.
- Governance and compliance. The governing board ensures adherence to laws, regulations, ethical standards, and internal policies, safeguarding organizational integrity.
- Stakeholder representation. The board serves as a mediator between management and shareholders, representing and protecting stakeholder interests.
- Performance monitoring. The board of directors monitors performance through regular evaluation of financial statements, business operations, and market trends.
The board of directors’ additional responsibilities include ensuring organizational performance, setting out company rules and policies, creating annual budgets, arranging compensation for top officials, and electing the CEO.
To ensure neutral monitoring, a board of directors frequently involves independent, non-executive directors.
What is the role of the executive committee?
The roles and responsibilities of the executive board committee vary depending on the unique needs and specifications of each particular corporation.
In general, the executive board is responsible for driving key decisions, resolution of controversial ideas, implementing strategies, and bridging the management-board gap.
Here is the list of executive committee roles:
- Facilitating the comprehensive review of the CEO’s performance and compensation
- Advising the CEO, offering valuable insights and guidance
- Streamlining the board’s activities and key priorities
- Setting clear goals and a developmental plan for the organization’s growth
- Harmonizing and overseeing the collaborative efforts of the entire board
Executive committee responsibilities
An executive committee acts according to the corporate bylaws to maximize the efficiency of daily operations. Here’s a brief rundown of its duties. However, every committee will have different responsibilities depending on the company’s industry and needs.
1. Providing organizational direction for the full board and the CEO
The CEO resolves a range of daily issues — some duties are covered by ad hoc task groups and standing committees; some are handled by the executive committee, while certain decisions require the attention of the full board. Therefore, the committee must determine which items to include in the agenda for the board meetings.
2. Evaluating C-level executives’ performance
The board hires the C-suite to perform specific duties and achieve certain goals. The executive committee oversees how they fulfill these obligations to ensure that company resources are well-spent. This is needed to review the executive’s compensation and adjust it accordingly.
3. 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.
4. Advising the CEO and executing the board’s power between meetings
The CEO is responsible for performing many tasks and decision-making. Having a tightly knit group of experts working closely with the CEO helps achieve better operational agility and crisis management capabilities.
5. Emergency decision-making
Business decisions are usually made after thorough consideration and discussion, but sometimes decision-making needs to be urgent. In emergencies, the executive committee must act immediately and let the full board judge later if their actions were necessary, correct, or justified.
6. Offering training and professional development for executives
Leaders are responsible for steering the organization in the right direction. Since leaders are made, not born, board members should always have some new horizons for which to strive. The committee oversees individual training programs for board members to ensure that they become effective leaders.
The executive committee in nonprofit organizations
For effective management, nonprofits must have an executive committee. The size of its nonprofit executive board is crucial for the effectiveness of the entire organization.
According to research conducted by Bain Capital Private Equity, seven is the ideal number of executives for the most successful decision-making. For example, their findings show that each additional member added to the executive committee lowers efficiency by 10%.
The infographic below depicts the probable structure of a nonprofit’s executive committee.
As the organization’s leadership team, they fulfill three fundamental legal obligations: care, loyalty, and obedience. They engage in various activities, such as:
- Creating a mission statement
- Electing and supervising the executive director
- Managing human resources
- Overseeing nonprofit programs and fundraising
In their article, Kathy Cohen and Nanette Fridman highlight the importance of a nonprofit executive committee to be able to make critical choices without alienating other members of the board.
Nonprofits should consider integrating these practices and politics into their work:
- To align decisions with their mission and community
- To be transparent
- To encourage inclusivity
In a Leading With Intent research study, BoardSource reported that executives in nonprofit organizations have lost touch with the areas and people they serve. According to the report, 49% of CEOs believe their board members are not establishing trust with the community, and 51% of respondents prioritize having knowledge or representation from the community.
When should a board establish an executive committee?
When a board or organization becomes large and complex, an executive committee may be formed to streamline decision-making and allow for more nimble responses to urgent matters. An executive communication plan might be integral here, ensuring clear communication over decisions and strategies.
During times of crisis or significant restructuring, this committee proves to be extremely valuable. The purpose of an executive committee here is to provide rapid response and oversight. Additionally, in situations where confidential or sensitive information needs to be shared or discussed, the executive board may choose to record executive session minutes.
The infographic displays how the executive committee works to reduce risk throughout all levels of the company’s organizational structure.
Additionally, certain regulatory or industry-specific requirements may necessitate the creation of an executive committee to oversee compliance and risk management. If specialized oversight is needed in areas like finance, technology, or mergers and acquisitions, an executive committee might be formed to harness the specific expertise within the board.
According to the SEEP Network’s guide, there are several helpful tips for establishing an executive committee. These include:
- Establishing clear terms of reference
- Ensuring diversity within the committee
- Defining the committee’s affairs and relations with the full board
- Regularly evaluating the effectiveness of the committee
7 tips on how to maximize the efficiency of an executive committee
It can be challenging when an executive committee that was previously successful encounters a setback. If board meetings have become more of a routine, the executive committee has become more exclusive, and the rest of the board seems to be feeling left out and not contributing as much as they used to, implementing some practical strategies can help get things back on track.
1. Develop a committee charter
To enhance the efficiency of the executive committee, create a committee charter that outlines its purpose, responsibilities, and decision-making authority. By establishing it, the executive committee can function cohesively, stay focused on its core objectives, and avoid potential misunderstandings within the organization.
2. 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.
3. Discuss the structure rebuild during the next meeting
Discuss what every board member thinks the committee should be doing and whether it is currently doing what it should. Such conversations help uncover the reasons behind the irritation or inaction of board members, as well as resolve any potential conflicts.
4. Analyze the bylaws
Let’s be honest, how many times do executives read their 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 various departments?
5. Eat an elephant one bite at a time
Try to increase the administration size, if possible, and add fresh blood from the managerial corps. These new members often bring new ideas to the table to help get the company moving in the right direction. If anything, this might produce enough votes to remove the all-too-powerful executive committee members.
6. 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 a board member who’s zealously fulfilling — or neglecting — their duties. Reading through the executive committee meeting minutes is also preferable to endless email exchanges.
7. Create an executive communication plan
Foster open and transparent communication among executive committee members and the board by creating an effective executive communication plan. It ensures all board members feel valued, informed, and encouraged to contribute their ideas and expertise.
- The executive committee’s composition and frequency of meetings are tailored to the organization’s size, scope, and specific needs, enabling agile responses to critical matters.
- Nonprofit organizations also benefit from executive committees, fulfilling essential legal obligations, facilitating fundraising, and aiding in crucial decision-making.
- Careful consideration of the executive committee roles and responsibilities, structure, and communication fosters efficient operations and balanced governance within the organization.
- The establishment of executive committees can be prompted by organizational growth, crisis management needs, or industry-specific requirements, enhancing risk management and specialized oversight.
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What does an executive committee do?
The executive committee’s roles and responsibilities include strategic planning, urgent decision-making, guiding top management, daily operations, compliance, and crisis leadership.
What is one of the key functions of the county executive committee?
The county executive committee oversees local government policies and ensures they align with wider government goals.
Who are the members of the executive committee?
The executive committee is made up of high-ranking executives, including the CEO, CFO, COO, and other top representatives. More particularly, it includes the chairman of the board, the vice president, the secretary, and the treasurer.