“A dog with too many owners starves to death.” This old Portuguese saying encapsulates an essential truth of corporate management: when too many people are responsible for a task, it never gets done.
In a nutshell, that is why board committees exist. A committee is a way of delegating a board’s responsibility and authority to make sure things happen.
Typically, a board committee is a subgroup of a board of directors charged with working on a specific task or specific field of management. Committees work to:
- free up the board of directors for its broader, more fundamental work
- create smaller, more manageable groups with a focus on assigned tasks or areas
- ensure the participation of the most qualified members for a given task
By limiting the number of decision-makers, a committee ensures a greater level of accountability and effectiveness for different corporate management functions.
Roles of board committees
Effective delegation requires clarity, which is why the role of a board committee should be well defined from the outset. Broadly speaking, committees can be divided into:
- permanent, where a standing committee is formed to deal with a broad field, such as company finances
- temporary or recurring, where a task force or ad hoc committee is formed to address a specific issue
Below are some of the most common types of committees.
Acts as an intermediary between the board of directors and the company’s chief executive officer. Besides hiring and determining CEO compensation, an executive committee can be tasked with executive oversight, providing evaluations and reports to the board of directors.
A finance or budget committee is charged with a company’s financial resources, assigning budgets to the different departments, and dealing with matters ranging from taxes and fees to employee compensation.
A governance committee addresses issues pertaining directly to the board of directors, such as the screening and recruitment of board members, board management, and assessment. It can also review members’ responsibilities and roles and work to ensure that the board members are well informed about bylaws and standard procedures.
Audit committees typically provide oversight for the process of reporting and disclosing a company’s financials. They can address matters such as hiring and evaluating external auditors, as well as supervising company compliance with relevant regulations and laws.
Other types of committees
The above-mentioned are some of the most common types of standing committees in the corporate world. A board of directors can form many other committees as needed, such as:
- communications and public relations
- personnel or membership
In some cases, ad hoc committees can also be formed to address short-term issues such as fundraising for a project or planning an operation. An ad hoc committee is dissolved or put on hold once it is no longer needed, freeing up members’ time for more relevant matters.
How to form and structure a committee
Before creating a new committee, it’s important to establish the question of necessity. It’s often the case that committees get unnecessarily created for tasks that could have been performed by the board itself or by a simpler structure. That’s why it’s important to ask, “Is there a real need for that committee?”
Don’t forget: committees are meant to increase efficiency, not to waste time with something that could be accomplished more easily.
Once it’s determined there is a good cause for forming a committee, there are a few aspects deserving special consideration.
Clarity of objectives
As already discussed, the committee should have a clear “job description” from the get-go. Many committees draft a charter that establishes their goals, responsibilities, authorities, and other key aspects of their mission.
Once again, the principle of simplicity should determine the size of the committee. It should have no more than the number of necessary members to address its duties, ensuring a cohesive and action-focused group.
There are several criteria to consider when determining a committee’s membership:
- Personal experience and relevant skills. Naturally, you’ll want people with expertise relevant to the committee’s tasks. For instance, you’ll want someone with a strong financial background for a finance or audit committee
- Interest and availability. Members should have an opportunity to contribute. If someone is already part of too many committees or lacks interest in the subject, they’ll likely fail to be a valuable contributor no matter their knowledge or experience.
- No conflict of interest. It’s important to ensure the corporate position of a board member does not interfere with their role in a committee.
- Compatibility with other members. Although not always possible, it’s highly desirable that members work well together, with no rivalries or serious disagreements that interfere with the committee’s functioning.
Also, remember: recruitment shouldn’t be entirely limited to board members. Trustworthy employees can also be called to act on a committee if they have the skills or experience.
The chair should be proactive in scheduling meetings and assigning specific tasks to other members. Having a determined and motivated leader can make all the difference to getting people to cooperate and getting tasks done.
It’s important to have some kind of self-assessment mechanism to determine whether the committee is fulfilling its functions and what could or should be improved.
What are the responsibilities of committee’s members?
While the specific responsibilities will vary according to the committee’s purpose and scope, in general, members should:
- be available to attend meetings and perform tasks demanded by the committee
- be engaged, voicing relevant opinions and concerns
- work in close cooperation with the chair to review materials for meetings, schedule meetings, and draft minutes and reports
To sum up
If a corporation follows the principles of simplicity and economy, board committees can serve as a fundamental way of delegating authority and streamlining work across the whole spectrum of corporate management fields.