Under the best of circumstances, boards of directors do the strategic planning and decision-making for their organizations according to the mission, vision and values of the organization, therefore maintaining good corporate governance. The reality is that it's not always practical for boards, especially large boards, to gather in person to take some necessary action. An executive committee is a smaller group with close ties through leadership who can get together, often with little notice, to address pressing issues that affect the organization substantially, such as an emerging crisis.
The executive committee has the power to act on behalf of the full board. The executive committee is a standing committee that often acts as a steering committee for the full board. Functioning as a steering committee, the executive committee prioritizes issues for the full board to address. Although the executive committee comprises senior-level leaders, the committee members report to the board.
Here we discuss how the executive committee differs from the board of directors, the executive committee's roles and responsibilities and how board management technology can make their position more effective.
Executive Committee vs. Board of Directors
While the executive committee and the board of directors do share some members and responsibilities, they are entirely separate entities. The board of directors governs the organization; they create policies, make big decisions and oversee all of the organization’s operations. In order to do this, they often establish committees, one of which is the executive committee.
The executive committee, then, functions as an extension of the board of directors. They are the board’s eye and ears when the board can’t gather in full. Board members are voted into the executive committee, which usually comprises three to seven members. These members act when the entire board can’t; they make decisions in between meetings and resolve any urgent issues facing the organization.
Though the executive committee meets frequently and independently, they’re still ultimately accountable to the board. They should submit regular meeting minutes, documentation and a record of votes to the board of directors.
Who Should Be On the Executive Committee?
The Business Dictionary defines the executive committee as a “group of directors appointed to act on behalf of, and within the powers granted to them by, the board of directors. Typically, it consists of a chairperson, vice-chairperson, secretary, and treasurer.”
- Chairperson: The chief officer of the board oversees both the board of directors and the executive committee. This is who will appoint other committee chairs, and they’ll also act as the board spokesperson. Alongside the CEO, the chairperson ensures all board activities align with company goals.
- Vice-chairperson: The vice-chair is the executive committee’s second-in-command. They both assist the chairperson and stand in for the chair when they cannot be present. Vice-chairs tend to wear many hats, since they also serve on other board committees, as needed.
- Secretary: Just like the board of directors, the executive committee secretary is charged with maintaining documentation, including meeting minutes. They keep minutes, maintain a committee calendar and ensure all members have access to board documents. Some executives also look to their secretary to help uphold good governance among all board members.
- Treasurer: The treasurer oversees all things finances, including bank accounts and tax forms. They’ll also work with the CEO to prepare and present to the board an annual budget. In addition to the executive committee, the treasurer also serves as the chair of the finance committee.
Appointing an Executive Committee
The composition of the executive committee includes senior-level executives and board officers. The organization's bylaws spell out exactly who serves on the executive committee. Typically, all of the officers of the board are invited to serve as executive committee members, along with the corporation's President or CEO.
Most executive committees are fairly small, with three to seven members. In some corporations, the board chair appoints the members of the executive committee, but, usually, the board appoints the members.
It's possible for boards to take another approach to appointing members of the executive committee, such as appointing the chairs of each standing committee and the chair of the board, as long as the bylaws concur. Some boards find it helpful to have chairs from the finance, governance, program development, and communications committees readily available for immediate input on urgent matters.
Meetings of the Executive Committee
In most cases, the executive committee meets more frequently than the board. More frequent meetings make it easier for them to move faster when necessary. The schedule for executive committee meetings varies as much as corporations do. Executive committees may meet monthly, bimonthly, quarterly or on an as-needed basis.
The Executive Committee and Its Relationship to the CEO
The CEO often serves on the executive committee. Whether the board has this type of arrangement or not, the CEO usually has a special relationship with the executive committee.
The executive committee usually takes responsibility for the CEO selection process. Their relationship continues as the executive committee sets the CEO's compensation package and works with the CEO to establish goals. On an annual basis, the executive committee evaluates the CEO's performance and implements benefits and compensation according to their agreement. The board receives a report of these activities from the executive committee and approves their actions.
The executive committee usually works closely with the CEO, acting in an advisory capacity. Because of this special relationship and the close bonds that often form between the CEO and the executive committee, the executive committee usually serves as a liaison between the CEO and the full board.
Executive Committee Roles & Responsibilities
Boards will outline the specific duties and responsibilities of the executive committee, which vary according to each organization's needs, in the bylaws. Following is a description of many of the common duties and responsibilities of executive committees.
1. Providing Organizational Direction and Acting on Behalf of the Board
Executive committees provide organizational direction for the CEO and the full board. Committee members help the CEO and board members to establish items for board meeting agendas.
As noted earlier, executive committees usually have the power to act on behalf of the full board in emergency situations. The bylaws will outline any limitations in their power based on the committee's defined purpose.
Executive committees usually conduct research relative to investment, risk and industry trends, so that they can actively participate in strategic planning and advise the board on pertinent business matters. Along with the full board, the executive committee should be monitoring and evaluating progress toward the company's strategic goals and initiatives and making periodic and timely presentations to the full board on progress.
2. Providing Organizational Oversight
Executive committee members have many oversight duties. They are responsible for overseeing the daily implementation of board policies and making sure that the board is establishing and maintaining good corporate governance practices.
These activities include overseeing the company's policies on ethics, security guidelines, quality management, human resources and regulations. Oversight duties also include overseeing ad hoc committees that work on policy development by making sure that they complete their objectives. Discussions of the executive committee should be encapsulated in their minutes, which they should present to the full board in a timely manner.
Executive committees also have a role in forming and sunsetting committees and task forces. It's normally considered best practice for executive committees to assess their committees and committee chairs every three years to make sure that committees are productive and necessary. Evaluations should include making sure that all board members serve on at least one committee.
3. Managing High-Level Workplace Issues of a Serious Nature
Every corporation has a designated chain of command. As a normal course of action, managers handle any workplace matters. However, serious issues may reach the board. In these types of situations, the executive committee hears matters first and decides which issues stop there and which require moving up to the board level.
When Should a Board Establish an Executive Committee?
Every board director brings value to the board. But no matter how skilled they are, they can’t be in all places at once. Executive committees can act quickly, ensuring the organization and the CEO have the support they need at all times. Though most boards can benefit from an executive committee, it’s essential in the following circumstances:
- Large boards: An executive committee can often form a consensus faster, allowing them to be more agile than the entire board.
- Non-centralized boards: Though virtual meetings make it easier for the entire board to gather, scattered boards can have a harder time meeting on short notice. The executive committee can sidestep this issue to quickly address any challenges.
- Many repetitive matters: The entire board doesn’t need to be present for standard legal or financial procedures. The executive committee can stand in for organizations that need recurring approvals or oversight on the same or similar matters.
- Controversial ideas: The executive committee can represent a litmus test for the rest of the board. If an organization often deals with controversial topics, they can vet them in the executive committee before bringing the issue to the rest of the board.
Though an executive committee might sound helpful, they aren’t a one-size-fits-all. Smaller boards, active boards or boards without regular committees might find that the traditional board of directors can meet all of their needs. It’s important to remember that the executive committee doesn’t replace the board directors; it simply enhances the board’s reach in cases where the entire board of directors won’t need to mobilize.
Communication and Board Development
To some degree, the executive committee also enhances communication between the board, committees and staff. Members of the executive committee are often the glue that facilitates cohesiveness by keeping everyone in the loop with alignment and decision-making.
The executive committee also takes the lead on issues such as board training and development, mentoring and conducting annual board assessments.
Boards of directors usually have jam-packed agendas. The work of the executive committee helps to streamline many of the activities that the board needs to address, which makes board work more efficient.
Executive committees have been staples of good governance for many years running. Perhaps this is because they can readily fill some of the gaps that make it difficult for large, geographically diverse boards to handle. Delegating certain issues to standing committees such as the executive committee is just one of many things that makes an effective governance framework.
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