Board committees in context

Advantages of this division of work are that they allow a few directors to concentrate on specific issues in more detail, than the board as a whole.
In addition, board committees ease the burden of excessive information material, flowing through the main board, which can impede, rather than facilitate good decision making.
Mandate, size and level of development of the organisation, dictate how board committees are structured. As well, an organisation’s governance model has a strong bearing on the structuring of committees.
In general, the work of committees is to study specific issues, make certain decisions, make recommendations and report back to the main board, for final adoption or rejection.
Accordingly, each committee should have clear stated terms of references and recorded minutes.
A good number of boards have the following three groupings as a standard, audit, remuneration and nomination committees. Depending on the organisation’s nature of business, its size and strategies for the future, it is common to come across other committees such as empowerment, environmental, health and safety, investment, actuarial, credit, chairpersons and so forth.
However, as a minimum the King Committee recommended that a board should have an audit and remuneration committee.
Most importantly, in recognising the right for boards to establish committees, it should be observed that boards are not exonerated from compliance with legal duties and responsibilities. In other words, the whole board has full responsibility for the proper working and reporting of its committees.
It should also be remembered that the underlying reasoning behind having board committees, is to enhance the efficiencies and effectiveness in the functioning of boards of directors. Whenever board committees fail to deliver timely, competent and useful recommendations to the board, this should be a warning sign. Comedian, Milton Berle, described a committee as a group that keeps the minutes and loses hours. It is possible to lose board hours and valuable time of the organisation, through board committees. Those lost hours are often costly both in financial terms and unnecessary pressure on members.
A committee might be simply going through the motions, without really doing its job as it should. This is worse than not having a committee at al, as this gives a false sense of security to the main board.
Having too many committees can lead to confusion. For instance, where a board has a membership team of eight directors and four standing committees, a director would have to be a member of at least two committees. In cases where boards appoint ad hoc or special committees, such as, to deal with special issues of mergers and acquisition, individual directors find themselves, spread even thinner.
It also gets difficult to allocate particular issues to committees, due to uneven distribution of expertise among members. Not only is this confusion limited to issues, but members themselves when spread too thin, find it difficult to focus in-depth.
This defeats the whole purpose of having committees in the first place. Board committees, are supposed to focus on clearly defined issues in greater depth than the main board. This is difficult to achieve, when there are too many committees.
Boards, in an effort to comply with corporate governance recommendations, often feel pressured to constitute too many committees, than necessary. In evaluating board performances, it is therefore necessary to revisit and consider effectiveness of board committee structures and processes.
It must also be borne in mind that decision making and recommendations by board committees, can never take the place of effective and timely actions of management. Thus, board committee processes should not try to compete with management processes.
In this era of economic difficulties and organisations are having to focus on survival and growth issues, all at once, boards should re-visit their committee structures to save costs and sharpen performances.
Certain inactive committees could be merged with others, basically to reduce the number of committees. Issues of survival, require full board deliberations. They also need to be timely and acted upon quickly. Thus, delegating certain matters to committees might just be a waste of time.
Notwithstanding the importance of board committees, there is a misconception that board decisions are necessarily more transparent, when committees are involved. While this may sometimes be true, committees are not a guarantee to transparency.
Furthermore, it is the main board, which has the ultimate duty and responsibility to make final decisions, in a transparent manner. Re-visiting board groupings is necessary to refresh and make committees relevant and effective.
In re-visiting board groupings and functioning, the follow general guidelines should be considered.
l Determine whether or not a committee should be formed, merged or disbanded.
l Can the tasks or issues at hand be assigned to individual specialist members or special advisors, as alternative to forming a committee? This not only saves on time, but gives the individual specialist members freedom to make quick decisions.
l Avoid using a committee when one person can accomplish a task and advise the main board
l Revise committee types, sizes and memberships. Where a special committee had been formed and has now completed its task, it should be disbanded as soon as possible.
l Update and revise terms of reference for each board committee, so as to make them relevant.
l Ensure that committee members are intellectually independent, qualified and diligent.
l Are members available to meet regularly?
l Board committees, can not function properly without relevant information. Are members adequately informed and encouraged to engage in open and candid communication?
l Do committee members meet regularly and quickly resolve issues, while keeping the main board fully updated?
The aim is to ensure that board committee structures remain relevant for governance and strategic purposes. It is also to ensure that committees enhance the functioning of the main board, making it better efficient and effective. Having committees on board is more than a compliance issue, but must enhance quality of decisions and recommendations.
Just as corporate governance is a state of being for an organisation, its structures such as, board committees, should reflect this life. It should take into account the present and future existence.
Board committees should be structured and made to work in context with, the current and the outlook environment. As much as possible, issues that can be quickly decided upon by the main board must be concluded quickly. Committees should not be an excuse for red tape, rather they should enhance performance of boards.