Best practices for board committees
If board presidents could choose one of the top changes they'd like to make to improve their board's engagement, they'd alter their committees. That was one of the top answers given by some of the 702 presidents, chancellors and board professionals of public and independent institutions and systems according to the 2011 AGB Survey of Board Governance. The other top answer was that they'd like to alter their agendas.
Committees do the bulk of the legwork in helping their boards accomplish their work. Just as board structures need to uniquely reflect a corporation's needs, board committee structures also need to reflect the strategic plans the board develops.
What Studies Tell Us About Committees
In 2015, researchers discovered that 52% of the board activity in S&P 1500 firms after the SOX Act passed occurred in board committees.
The 2011 AGB Survey of Higher Education gives us some additional intriguing information about board committees in higher education:
- Within the last three years, about half of all boards restructured their committees.
- About two-thirds of the boards noted above indicated that their intent in restructuring committees was to more closely align the board's work with institutional policies.
- Boards were more likely to add committees than to eliminate them.
- Audit committees were one of the most frequently added committees.
- 62% of committee chairs of boards of public institutions most often presented committee reports orally to the board.
- 79% of independent institutions preferred to present their accomplishments and findings to the board in written reports.
The Problems With Committees
When boards develop the right committees for the right reasons with the right objectives in mind, those committees become a vital part of the board's work. The problem with committees comes in when boards take a thoughtless, passive approach to board committee development.
Boards should form committees to do the work that it's impossible or impractical for the board to perform on its own. Many boards make the mistake of forming too many committees for too little reason. This approach often stretches board directors too thin. Without a solid purpose, committee members become bored and unproductive.
Just as board size is important, committees can also be too large or too small to perform any meaningful work. Committees that are too large risk not getting all the valuable perspectives and opinions of their members and risk slowing down the work of the committee. Committees that are too small risk board directors being too busy to fully commit to their board and committee duties, and they may fail to arrive at committee meetings prepared and ready to engage.
Another mistake that boards make is not ensuring that their committees have clear expectations and not holding them accountable for regular updates and results.
Committees may make oral or written reports, which should become part of the meeting minutes.
Boards have various schools of thought regarding which board directors to choose for their committees. Best practices suggest that board directors shouldn't serve on more than two committees in the interest of being committed and effective.
Best Practices for Board Committees
A board's needs are ever-changing. Accordingly, the work assignments for committees need to be flexible and change as often as necessary to keep committee work aligned with the board's strategic priorities. Keeping up on committee objectives requires boards to periodically evaluate whether the committee's instructions are clear and relevant and to ensure that they don't overlap with other committees' responsibilities.
Some boards function best with a process of rotating board directors through various committees, so they gain a greater understanding of each committee's work. Others retain the same members on committees so that they develop a deeper level of expertise in the committee's area of work and become an integral part of helping the committee reach its goals. It's also possible to take a hybrid approach and find some balance between the two approaches. Where issues may intersect, committees may join together occasionally to collaborate.
To fulfill the Duty of Care, boards must meet the growing pressures by legal and regulatory authorities. It's crucial in today's climate for boards to take a proactive approach by placing a heavier focus on committees' work and how committees interconnect with other committees, rather than forming committees as a matter of routine. Boards guide committee work with the goal of shaping the board.
Forming sub-committees is a good way for committees to tackle highly specific work. Sub-committees can be instrumental in making committee work manageable.
Boards usually have a few standing committees and form ad hoc committees as needed. Ad hoc committees meet for a shorter period and they're charged with working on specific issues.
To save valuable board time, board committees that haven't taken any actions and don't have crucial information to report may opt to file a short, written report of the committee's work and have it included in the board meeting materials. As a word of caution, board directors shouldn't be taking meeting time to review written committee reports.
Role of Committee Chair
The committee chair is an active role that requires the director in this position to schedule meetings, prepare minutes or reports, and follow up on absent members. Committee chairpersons must prepare background materials for the board committee's work, translate the board's plans into committee agendas and report the results of their work to the board.
It's considered best practice for boards to have a nominating and governance committee that outlines a clear statement of responsibilities. Typically, nominating and governance committees are responsible for composing a skilled, diverse board, orienting and onboarding new board directors, and assessing the whole board and individual directors.
How a Board Portal Can Help Boards Structure Committees
Best practices place a new focus on board refreshment. As board directors rotate on and off the board, institutional knowledge may leave the boardroom with their departure. A board portal securely stores the historical information on how boards made decisions about the types of committees they needed and how they determined who should serve on them. Diligent's board portal provides unlimited storage for committee charters, research, reports, and the committee's findings and actions. Diligent Messenger is a secure communications tool that board committees can use to communicate using a high-security platform.
Committee structures, governance software solutions and best practices combine to help boards work as efficiently and effectively as possible.
