Board Committee

Nature of a Board Committee:

A board committee is set up by the board,and consisting of selected directors,their responsibility is to monitor the company's affairs for which the board has reserved the power of decision making.

A committee is not given decision-making powers.Its role is to monitor an aspect of the company's affairs and:

report back to the board, and
make recommendations to the board.

The full board members should make a decision on the committee's recommendations.When the full board rejected the recommendation tfrom a committee it should be a very good reason for doing so.It is important to remember that a board committee is not a substitute for executive management and a board committee doesnot have executive power.

1).Main Board Committees:

Within a system of corporate governance,a company might have atleast three or possibly 4 major committees.These are:

Remuneration Committee, whose responsibility is to consider and negotiate the remuneration of executive directors and senior managers.
An Audit Committee, whose responsibility is to monitor financial reporting and auditing within the company.
A nomination Committee, whose responsibility is to identify and recommend individuals for appointment to the board of directors.
A risk committee,where the responsibility for the review of risk management has not been delegated to the audit committee.

2. Reasons of having Board Committees:

The two main reason of having board committees:

The board can use a committee to delegate time-consuming and detailed work to some of the board members.Committees can help the board to use its resources and the time of its members more efficiently.
The board can delegate to a committee aspects of its work where there is an actual or a possible conflict of interests between executive directors(management) and the interests of the company and its shareholders.However, to avoid a conflict of interests,board committees,should consist wholly or largely of independent directors.This mean independent Non-Executive directors.

-A remuneration committee of independent NED negotiates and recommends remuneration packages for Executive directors or senior managers.The committee members do not have a personal interest in the remuneration structure for senior executives,because they are not remunerated in the same way as executives.They receive a fixed annual fee.

-An audit committee of Independent NED can monitor financial reporting and auditing to satisfy themselves that they are carried out to satisfactory standard,and that executive management are not hiding information or presenting a misleading picture of the companys financial affairs.The work of the audit committee therefore provides a check on the work of executive managers such as the finance director.The committee can also monitor the effectiveness of the auditors,to satisfy themselves that the auditors carry out their work to a suitable standards.

-Similarly,the work of a risk committee of the board shouls be to satisfy itself that executive management have a suitable system of risk management and internal control in place,and that these systems function effectively.This is another check on executive management.

-A nomination committee makes recommendations about new appointments to the board.The views of executive directors are important in this aspect of the board's work particularly when a vacancy for a new executive director occurs.However,independent NED should have some influence in the nominations process to make sure that new appointments to the board will not be selected 'yes men' and supporters of the CEO or chairman.

Audit Committee

Remuneration Committee

Nomination Committee

Risk Committee

Nature of a Board Committee:

A board committee is set up by the board,and consisting of selected directors,their responsibility is to monitor the company's affairs for which the board has reserved the power of decision making.

A committee is not given decision-making powers.Its role is to monitor an aspect of the company's affairs and:

report back to the board, and

make recommendations to the board.

1).Main Board Committees:

Within a system of corporate governance,a company might have atleast three or possibly 4 major committees.These are:

Remuneration Committee, whose responsibility is to consider and negotiate the remuneration of executive directors and senior managers.

An Audit Committee, whose responsibility is to monitor financial reporting and auditing within the company.

A nomination Committee, whose responsibility is to identify and recommend individuals for appointment to the board of directors.

A risk committee,where the responsibility for the review of risk management has not been delegated to the audit committee.

2. Reasons of having Board Committees:

The two main reason of having board committees:

The board can use a committee to delegate time-consuming and detailed work to some of the board members.Committees can help the board to use its resources and the time of its members more efficiently.