Board Committee: Basic Structure & Types
Board committees serve several purposes within the ecosystem that is a board of directors. A board committee typically consists of individual members of the board and can sometimes draw from other leaders within an organization. Board agendas and responsibilities are expanding rapidly, meaning much of the board’s legwork today is accomplished by its committees.
The purpose of a board committee can range from company to company. For corporate boards, the three most common standing committees are the audit committee, compensation committee, and nominating and governance committee. However, other standing committees can include, but are not limited to, are the investment committee, executive committee, and cyber-risk committee to name a few.
Determining Board Committee Structure
Each board committee should serve a specific strategic or oversight purpose, delineated in a written committee charter or “statement of purpose.” Board committees are typically dictated by a common set of best practices, but sometimes this can differ. Most often, each board committee is chaired by a board member who provides leadership for committee meetings. The number of committee members can vary greatly from one board committee to another, but generally speaking, a board committee has a minimum of three members – all of whom, or most, are current board directors.
In addition to the standing committees listed above, boards may create ad hoc committees that have a specific focus, and then disband once they’ve met their objectives – for example, a technology committee created to help the organization plan for a major upgrade to technology infrastructure that has long-term strategic implications. The specific committees a board creates vary depending on the specific regulations the organization must adhere to, and also vary by industry, stage of development of the organization, and the organization’s strategy.
Best Practices for Board Committee Rotation
As with the full board, each board committee should conduct an annual evaluation and occasional refreshment to ensure the committee composition still aligns to the committee’s goals. In particular, it’s important for each board committee to ensure a succession plan is in place both for onboarding new members and new committee chairs.
Generally speaking, the work of ensuring each committee is evaluated and has the appropriate composition is headed up by the Nominations and Governance Committee, which should approach refreshing committee membership as part of a broader board refreshment strategy.
Diligent’s Governance Cloud includes tools designed to make these processes more robust and streamlined. Nominations and Governance Chairs can utilize purpose-built Nominations and Governance tools that can help them identify new candidates for the board and committees. Similarly, Diligent’s secure Evaluation system can help Nom/Gov Committees organize and facilitate a thorough process for annual board and committee evaluations.
By implementing these modern governance tools and practices, organizations can ensure they have the strongest and most appropriate membership to meet their goals.