Board Committees

What Is a Board Committee Charter?

Standing committees for boards should have a committee charter. The number of standing committees varies by size and type of corporation. Standing committees are responsible for debating issues in their area of expertise. Committees are an important part of board work because they devote extra time to doing research and giving issues an in-depth perspective. Typically, standing committees make quarterly reports to the full board and recommend actions and decisions for the board.

A corporation’s bylaws will list the types of standing committees the organization should have. A board committee charter addresses the committee’s mission, authority, responsibilities, composition, frequency of meetings, requirements for minutes, and how they report their findings to the board.

Components of a Committee Charter

The components of a committee charter typically cover five distinct areas:

  1. Committee’s mission statement or charge.

This statement describes why the board established the committee and outlines the committee’s main purpose or objectives.

  1. Powers and authority of committee.

This portion of the charter clarifies how members work together to fulfill the goals and objectives of the committee. This section also defines the committee’s authority and any limits on their power.

  1. Composition of the committee.

This portion of the charter describes the guidelines for appointing the committee chair, committee members, committee officers, staff members and outside members. Also, the charter should spell out the term of the members.

  1. Roles and responsibilities.

Board charters spell out how frequently committees will meet, whether they’re required to have agendas and submit minutes, and what the quorum requirements are.

  1. Decision-making.

As a rule, board committees have little or no decision-making authority. A notable exception is the executive committee, which has limited power and authority under certain situations.

Benefits of Board Committee Charters 

Board committee charters are considered best practices for good corporate governance. Committee charters help the board to meet its legal and regulatory commitments. In addition, committee charters serve as a reference for disputes between committee members and remind them of the legal framework in which they must operate. The wording in the charter orients new committee members to the committee’s structure and its rules. The work that board committees perform acts as an extension of the board’s important work, providing a comprehensive and effective process for meeting board goals and objectives.

Developing a Board Committee Charter

It’s not difficult to develop a board charter, but there are a few steps boards should take to ensure that committees can get to work as soon as possible and have all the information they need to fulfill their duties as committee members.

Several people should be consulted before writing a board committee charter. Key governance personnel, the board chair, the CEO and the company secretary will all have valuable input for the charter. They will also be valuable in the pre-approval process, as they will help to document existing board policies and practices, analyze documentation and prepare materials for discussion.

When everything is in order, the same people meet to discuss the draft charter. When all of the documents are in order and the board is in agreement, the board votes for final approval of the committee charter. It’s also considered best practice for a committee of the board to review the charter annually.

Using a Sample Committee Charter as a Template

It’s helpful for boards to review samples of other board committee charters before writing their own. Here’s a sample of a committee charter for a nominating and governance member.

Nominating and Governance Committee Charter

Mission

The purpose of the nominating and governance committee is to recruit new board members and to plan for the succession of retiring board members. The committee will work toward composing a diverse board with the necessary skills to serve the organization.

This committee is responsible for developing a board orientation policy and process and for onboarding new board directors. This committee will facilitate board self-evaluations annually and individual director evaluations at least biannually.

Authority and Responsibilities

Policies

This committee will establish, review and update the board about policies impacted by governance changes. It will also oversee the adoption of appropriate governance policies and procedures.

Oversight of Implementation

This committee is responsible for developing a board orientation policy and process and for onboarding new board directors. Members of the committee will make recommendations to the board regarding governance policies, practices and procedures.

Evaluate Performance

This committee will facilitate board self-evaluations annually and individual director evaluations at least biannually.

Educate the Board

This committee will educate the board about governance mandates, changes and discussions. It will execute other such duties as delegated by the board. The committee will make recommendations to individual members and to the full board for workshops and other educational opportunities to improve the board’s performance.

Organization

Review of Charter
This charter shall be reviewed and re-evaluated by the nominating and governance committee at least annually, and any proposed changes shall be submitted to the board for approval.

Membership/Structure/Quorum

The investment committee shall consist of at least six but no more than eight members, including ex officio members. The committee chair shall be appointed by the board chair. At least three members of the committee must be board members.  Committee members should have experience or an interest in governance expertise.

Staff Designee

The board may appoint a staff member to the committee as necessary to improve the functioning of the board.

Meetings

The nominating and governance committee will meet at least quarterly. A quorum of any meeting of the nominating and governance committee will consist of a majority of its voting members. Committee members may participate by teleconference.

Agenda, Minutes and Reports

The chair will be responsible for establishing the agendas for meetings.  An agenda, together with additional materials, will be sent to committee members at least 10 days in advance of the meeting.  Minutes for all meetings shall be drafted by the committee chair and approved by committee members at the following meeting.

Board committees that are aware of the scope of governance issues and are active in applying their knowledge and expertise to their boards set the stage for a diverse and effective board. Governance software tools, such as a board portal, D&O questionnaires and board self-evaluations like those offered by Diligent’s Governance Cloud, help board committees to perform their work within the security of a digital platform where they can streamline processes and procedures to focus more readily on the committee’s charter.

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