Glossary term
Board Committees
Subject: Governance, Board and Committees
Board committees are smaller groups of directors, appointed by the full board, that study specific areas such as audit, risk, pay or appointments and report back with findings or recommendations.
Explanation
A full board cannot go deep on every subject, so it delegates preparation to committees. Common ones are the audit, risk, nomination and remuneration committees, and many boards add others for governance, ethics, technology or sustainability. Each has a written mandate, a chair and a mix of members chosen for relevant skills. Governance codes often ask that some of them be made up wholly or mostly of independent directors, because they deal with areas where management has an interest. Committees usually advise, and the full board stays legally responsible for the decision. Their reports and minutes let other directors see what was discussed. Investors and supervisors read committee lists and mandates to judge whether a board has real depth in areas like audit and risk.
Example
A regional insurer grows quickly and its board decides one meeting a quarter is not enough for risk and pay questions. It forms a risk committee and a remuneration committee, each with three non-executive directors and a written mandate. Both report to the full board after every meeting, and the board votes on their proposals.
Not to be confused with
- Management committee
- Executive committees such as a credit committee sit under the chief executive. Board committees consist of directors and report to the board.