Board Committees Explained (Structure, Roles, Types and Benefits)

A board of directors plays many roles in a corporate setting, which can often turn overwhelming or require a second expert opinion. From instituting policies and leading the company’s crisis efforts to advising and remunerating top executives, these jobs can sometimes take a toll on the board, and that’s where board committees come in.

Board committees are groups formed by the board or the board chair on behalf of the board to lend a helping hand. They help the board of directors accomplish specific tasks. Often, they do most of the heavy lifting as the board focuses more on other areas that call for their full attention. 

Overall, board committees aren’t the same. They are structured differently. Some are structured only to serve a short period to accomplish a specific task and are thus disbanded once they accomplish it. Others are, however, founded to offer support to the board continually. 

This guide will help you understand the various board committee structures, the types of board committees for each, and their roles. We’ll also explore the roles and benefits of board committees, among other helpful information. Let’s dive in!

what are board committees

Key Takeaway:

  • Board committees are small groups of 3-7 individuals assembled to help the board of directors accomplish specific tasks.
  • Board committees perform different roles, which include oversight, decision-making, board advisory, and board delegated functions. 
  • Notable benefits of the board committees include helpful varying viewpoints, reduced workload (for the board), improved efficiency, enhanced expertise, better accountability, and bolstered oversight. 
  • Board committees are structured as standing or ad hoc committees. Standing committees are long-term, while ad hoc committees are short-term. 
  • Examples of standing board committees include executive, governance, audit, finance, program, and membership committees.
  • Examples of ad hoc committees include strategic planning committees, bylaws committees, and capital campaign committees. 
  • Some best board committee practices include observing specificity, flexibility, correct sizing, regular review, correct structuring, strategic founding, manageable directors’ involvement, and committee refreshing. 

What are Board Committees?

Board committees are small groups of talented and experienced individuals, some of whom are individual directors, appointed to help the board of directors attain its objectives. These individuals are handpicked based on skill, knowledge, and expertise. They are expected to come up with solutions that could help directors address their points of concern. 

What is the Role of Board Committees?

Board committees play an integral role in an organization, especially for the board of directors. That includes the following:

  1. Oversight Functions: Well-planned committees handle various oversight responsibilities, including project evaluation, policy compliance, and strategic planning to ensure everyone complies with the organization’s goals. In the long run, board committees deliver results, and that’s only attainable through proper oversight. 
  2. Decision-Making Functions: Though board committees are subordinate to the board of directors, which is the apex decision-making entity in a corporate setting, the fact that the board committees are made up of a few individual directors means they still have some decision-making powers. The executive committee, in particular, handles most of the decision-making on behalf of the other committees. 
  3. Board Advisory Functions: Board committees help the board of directors address issues on risk indicators, corporate governance, capital distribution, or any other area. Once they develop practical solutions and suggestions, they advise the board accordingly. 
  4. Board Delegated Functions: Sometimes, the board of directors may have more on its plate than it could accomplish, resorting to delegating some of it to the board committees. So, ideally, board committees execute jobs assigned to them by the board of directors. 

What are the Main Benefits of Board Committees?

Establishing board committees may be the best decision for a board of directors as it comes with these benefits: 

  1. Varying viewpoints: Board committee members come from different backgrounds and professions, which means they have varying perspectives and opinions. As a result, the members can offer various suggestions to address the organization’s issues.  
  2. Reduced workload (on the board): The fact that committees are in place means that the board of directors doesn’t have to handle everything. They can delegate some of the work to the board committees, which reduces their overall workload and improves their efficiency. It allows the board to pay more attention to more pressing matters. 
  3. Improved efficiency: Some board issues may require more attention and time than the board can offer. In such a case, a committee can give the project the attention it needs and allocate it the right amount of time, which helps to maximize work efficiency. In the long run, there’s more in terms of output. 
  4. Enhanced expertise: Board committees bring together experts from different fields who can collectively inject ideas and solutions that could help the board of directors. The board can then base its decision-making on better expert advice. 
  5. Better accountability: Since board committees are established to address specific issues, they are accountable to the board of directors for every decision they make concerning them. The board expects them to exercise caution and due diligence when making decisions, and they must be meticulous in their research. 
  6. Bolstered oversight: Because board committees comprise skilled and experienced members, they can make a broader assessment and pay extra attention to the various issues they deal with. Ultimately, that bolsters their oversight roles. 
What is the role of the board committees

Membership of Board Committees

Ideally, board committees are either chosen by the board chair or the entire board of directors, depending on the organization. Specific protocols, however, must be observed when appointing members to board committees, which include the following: 

  • Committee composition: Board committees should comprise well-versed members in areas like accounting, law, governance, business, and marketing. Moreover, these individuals should be of varying ages, genders, and ethnicities to demonstrate inclusivity and fairness. 
  • Chair appointment: The board of directors identifies the most eligible candidates to chair the various committees through the nominating committee and votes on them. The board then forwards the final names to the trustees for approval. 
  • Independent directors’ appointment: The board of directors will also need to appoint some individual independent directors to the board committees. The board must ensure the individual directors have the proper skill set and expertise to contribute to the committees. Their appointment is eventually approved during a shareholders’ meeting. 

How are Board Committees Structured?

Most board committees are structured in one of these two ways:

Option 1 – As Standing Committees

Standing committees, also known as operating committees, are established to continually serve the board of directors. They are founded by the organization’s bylaws and in compliance with its customs and policies to support the board of directors constantly. They aren’t disbanded upon accomplishing a task, as another is always waiting. 

Perfect examples of standing committees are:

  • Executive Committee
  • Governance Committee
  • Audit Committee
  • Budget Committee
  • Program Committee
  • Membership Committee

Option 2 – As Ad Hoc Committees

Ad hoc committees are established to serve the board of directors for a limited timeframe. They are disbanded as soon as they accomplish their objective. Their terms usually last less than a year, but a few may run for longer before their dissolution. 

More often, ad hoc committees are instituted to amend an organization’s byways, develop its strategic plan, form a subsidiary company, or relocate the company. They may also be formed to recruit a CEO, launch another subdivision of the organization, or work with coalitions. 

Ad hoc committees are sometimes founded to research a particular problem, develop possible solutions, and recommend them to the board of directors. That is often the case when an organization deals with failed membership, poor intra-organizational communication, and low sales. 

Perfect examples of ad hoc committees include the following: 

  • Strategic Planning Committee
  • Bylaws Committee
  • Capital Campaign Committee

NOTE:

A board of directors doesn’t always have to establish a board committee when it wants something accomplished with experienced hands and intelligent minds. Sometimes, it can set up a task force to achieve the objective. A task force allows a board to accomplish a specific goal within a short period, after which the board may dissolve it. 

For example, a task force could be involved in planning a special corporate event or analyzing a merger. Once they are through, they can share the findings with the board of directors. The board can then decide what to do with the report. 

What are the main benefits of having board committees

What are the Different Types of Board Committees & Their Functions?

Having discussed the two board committee structures (standing and ad hoc), let’s look at the various types of board committees under each structure.

Types of Standing Committees

Here are the most typical types of standing board committees: 

1. Executive Committee

The executive committee, which consists of 3-7 members, is formed to act during meetings when it’s impossible to get the entire board of directors to sit for a special meeting. The committee mainly comprises chairs of the other boards, but in some cases, the board handpicks the members. 

The executive committee’s job includes hiring the CEO, setting their compensation, and evaluating their performance, which they share with the board. Furthermore, the executive committee liaises between the board of directors and the CEO. 

2. Governance Committee

The governance committee directly feeds the board of directors by handling the board’s recruitment, self-assessment, orientation, and continual education. In most cases, the committee serves as the organization’s nominating committee, recruiting new board members and top-level executives. 

For example, the governance committee may identify vacancies within the board, recognize gaps in demographics and competencies, and recruit potential members to fill the spots and fulfill the needs. 

3. Audit Committee

The audit committee, which comprises 3-7 members, is formed to continually offer auditing solutions to the company. For instance, the committee appoints an outside audit service to report to them. Then, they share the findings with the entire board of directors. 

The audit committee may also audit the expenses of top company executives and board members. To avoid a conflict of interest, at least one committee member must be a financial professional who isn’t the treasurer or the Budget committee chair. 

4. Budget Committee

Note that the Budget/finance and audit committees have different roles. On the one hand, the audit committee audits the Budget Committee’s and the treasurer’s work. In consequence, none of its members should come from either side – to avoid a conflict of interest, as mentioned earlier.

On the other hand, the Budget committee oversees the annual Budget preparation and shares the report with the board. In some cases, however, the Budget committee may oversee the investments, capital campaigns, and compensation packages for the board of directors and top executives. 

5. Program Committee

The program committee oversees an organization’s calendar, long-term planning, and programs. The committee may occasionally involve the organization’s members in developing the programs. In some organizations, two or more program committees may handle different programs. 

6. Membership Committee

The membership committee develops criteria for accommodating new members, including credentialing them and overseeing elections. However, it doesn’t have the power to revoke memberships, as that’s reserved for the board of directors. 

The membership committee also determines the members’ benefits and oversees conferences and annual meetings dedicated to members. 

Types of Ad Hoc Committees

Now, here are the common types of ad hoc board committees:

7. Strategic Planning Committee

Since developing a strategic plan ordinarily takes less than a year, companies may set up a strategic planning committee. This ad havoc board committee, which may sometimes be a task force, is responsible for developing a strategic plan for the organization or updating an existing one. 

Depending on how long the board is expected to run, it can also oversee its implementation and report its progress to the board of directors. 

8. Bylaws Committee

As the name suggests, a bylaws committee handles the organization’s bylaws. The committee reviews the existing bylaws and practices to ensure everything syncs. They also recommend changes to the bylaws and may work with the membership or governance committees, depending on the nature of their tasks.

9. Capital Campaign Committee

Organizations typically carry out their capital campaign after a few years; when they do, they establish a capital campaign committee. This committee’s function is to help the organization raise funds for its capital campaign. Donors not on the board of directors may serve on this ad hoc board committee. 

How are board committees structured

Best Practice for Board Committees

Generally, it takes several efforts and healthy practices to create an effective board committee. Here are the ones we highly recommend: 

a) Specificity

Board committees aren’t founded just for the sake of it. They are instituted for a reason: to accomplish a specific task. An organization should, therefore, establish a board committee to achieve a particular task, which should be apparent from the onset, especially when it’s an ad hoc board committee whose lifespan is typically short-term.

b) Flexibility

A company’s needs change over time. Subsequently, board committees should adjust their strategy to accommodate the new changes. They should be able to evolve while aligning with the organization’s ultimate goal and contributing to its strategic plan. 

c) Correct Sizing

The committee must have the correct number of individuals to stay productive. Depending on the organization, a particular committee should have 3-7 members. Suppose the committee size is big, perhaps over ten people. In that case, numerous opinions will make it hard to reach a consensus, which may slow down the committee’s performance. 

On the other hand, if there are only a few members on the committee, they may be overwhelmed with some of the responsibilities, especially if they have a tight deadline to beat. The size should be just right to match the committee members with the task at hand. 

d) Regular Review

The board of directors must ensure the committee stays on track to reach its objectives. For that to happen, the board must periodically review the committee’s performance and make suggestions on areas that may need addressing or slightly more focus. 

e) Correct Structuring 

Ideally, a standing committee is founded to serve for a long time, while an ad hoc committee serves for a short time. Thus, knowing when to form an ad hoc board committee and when to continue relying on a standing committee is essential. And if you opt to settle for an ad hoc committee or task force, know when it’s time to disband it – mainly after it accomplishes its primary objective. 

f) Strategic Founding 

As the board, it’s crucial to form an ad hoc committee at a strategic time and for a strategic reason to complement a standing committee. Once a committee accomplishes its goal and is no longer relevant, the board should disband it. The board should guide the committee to align with its goals and reason for its founding. 

g) Manageable Directors’ Involvement 

As vital as it is to have a few directors on board committees, they should be assigned manageable roles that they can execute. It can be overwhelming to have one director serving multiple committees while still sitting on the board of directors. 

h) Refreshing 

Sometimes, it’s not enough for the board to review the committee’s performance and progress. At times, it’s more effective to freshen things up. That may mean reshuffling a few members across the committees where applicable, giving some a break, and injecting new energy. 

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Wrapping Up!

Board committees undeniably play an invaluable role in an organization, especially for board directors who wish for a second opinion before they can deliver a decision of colossal magnitude.

However, it’s critical that the ideal board committees are established and everyone understands their roles, including the board of directors, who are responsible for forming them. That’s where we come in as the Center for Corporate Governance (CCG). 

We run a monthly corporate governance training program that equips corporate heads with the right skills and technical know-how in corporate governance and leadership. Through our flagship program, you can learn the secrets of establishing result-driven board committees and solving various corporate governance issues that could stem from your organization. We invite you to check out this mastery course on our website today

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