There’s no shortage of items on a corporate board’s agenda. With so many pressures coming from regulatory bodies and shareholders, boards need to make the most efficient use of their time. Board committees provide a platform for boards to deal with specific issues that require specialized areas of expertise.
Board committees aren’t required to address many of the routine matters that boards must regularly complete and document. Committees of the board can set their agendas, so they can get down to the meat and bones of their work right away.
The idea behind committees of the board is to tap the specific talents, skills and knowledge of individual board directors to inform and educate the full board on particular areas of concern. Committees allow boards to divide the work of the board into manageable sections.
Committee charters outline the duties, responsibilities and expectations of the committee. Committees of the board are expected to be accountable for making timely reports to the full board.
Benefits of Establishing Board Committees
Certain board issues are of such a complex nature that they demand substantially more time than a board can commit to during the course of one or two board meetings. Boards can establish committees for nearly any need that they have to maximize their efficiency.
According to a research paper by Harvard Business School, committee size tends to increase with firm size. A committee of the board allows board members the proper time required to research various issues and permits broader participation by all board directors.
Committees of the board provide the benefit of strong accountability. Committee members have specific assigned tasks and are directly accountable to the full board for completing them. Because committees have dedicated time for addressing agenda items, boards expect them to conduct due diligence and be thorough, yet timely, in pursuing their responsibilities. Ultimately, boards are looking for comprehensive information that committees can present to them in a concise manner to help inform their votes on specific issues.
Even though board committees require strong expertise, their work often overlaps with the work of other committees of the board. With an eye on efficiency and to prevent duplicity, many boards structure their committees with multi-committee directors. Directors who sit on several committees share helpful information, which alleviates issues with information segregation. Multi-committee directors tend to be outside directors who have a surplus of expertise in several areas.
The Role of the Committee Charter
The committee charter outlines the specific responsibilities and expectations of the committee. The charter typically also defines the committee’s limits of authority and any identified timeframes.
When developing a committee charter, board directors should keep in mind that the committee’s work is primarily advisory in nature. The charter should detail the types of recommendations the board is looking for and define the committees’ authority, whether it’s expressed or implied.
Who Serves on Board Committees?
The board chair for a committee doesn’t necessarily need to have expertise regarding the issue that the committee is charged with addressing. However, board chairs should have a good understanding of the decision-making process. Board chairs need to be good facilitators who are capable of keeping discussions on track and moving. A good meeting facilitator has experience with how to lead the board committee to complete its work.
Committee members may be board directors or outside experts. The board president acts as an ex-officio member to all committees. Committee members usually have the expertise that the committee requires.
Committee work requires having members who are willing to spend the necessary time and effort needed to research various issues. Also, of great importance is that they need to understand that committee work is in addition to regular board work and that they should not sacrifice their commitment to one in favor of the other.
Committee members need to embrace a spirit of collaboration, which requires them to be contributors to discussions and to build on the ideas of others. Committee membership requires members to be willing to ask probing questions and to explore various perspectives and alternatives. Effective committee members help the rest of the group evaluate the adequacy of available data and are willing to take extra time when needed to seek out additional sources of expertise before making final recommendations to the board. Active committee members can be instrumental in the process of helping committees arrive at the types of recommendations that will be most helpful to the full board.
How Software Solutions Assist Board Committees
Technology has helped boards increase their efficiency with the introduction of board portals. Board portals and other software solutions are equally as helpful for the board committees that do the bulk of the boards’ legwork.
Diligent Messenger is a secure communications tool that alleviates concerns about hacks and data breaches because it offers a higher degree of security than personal and business email platforms. Committee members gain the assurance that their communications are secure when they work inside the board portal regardless of whether they are in the boardroom or accessing the application remotely.
Diligent Messenger is just one of the fully integrated software solutions that comprise Governance Cloud. Committee members can use Diligent Boards and the Messenger application to share documents, reports and other information or link to other online documents in a secure manner. Diligent Boards features user permissions so that only committee members can access committee documents. The board portal streamlines the process for preparing agendas and documenting official copies of committee meeting minutes.Diligent Boards offers a feature for granular control over users, so committee members gain the assurance that their work will remain confidential until they opt to release or share it. The software products that comprise Governance Cloud are all mobile friendly, which offers committee members the convenience of working remotely from their homes, offices or other places, which is another asset that enhances their efficiency.
Overall, digital solutions support good corporate governance principles while helping committees of the board to fulfill their duties and make careful, valuable recommendations to the board in the timeliest manner possible.