One of the recommended ways for achieving board effectiveness is through the setting up of board committees. Board committees generally lighten the workload of the board by focusing on specific issues and carrying out the required due diligence in order to provide comprehensive information/recommendations required for the Board to make informed decisions. Board committees are made up of directors and their responsibilities and duties must be clearly defined in board-approved committee charters which should be drafted by the company secretary and reviewed periodically.
Principle 11 of the NCCG provides that “to ensure efficiency and effectiveness, the board should delegate some of its functions, duties and responsibilities to well-structured committees, without abdicating its responsibilities.” The NCCG recommends that a company’s board should establish committees responsible for Nomination and Governance, Remuneration and Audit and Risk.
Some of the recommended practices for board committees as provided by the NCCG include the following:
a. The board should determine the number and composition of its committees as well as ensure that each is comprised of directors with relevant skills and competencies.
b. Only directors may be members of board committees, while members of senior management may be required to attend committee meetings.
d. The membership of board committees should be reviewed and refreshed periodically.
e. Each committee should be composed of at least three members. Individual board committee charters will indicate where independent non-executive directors are required.
f. The chairmen of board committees should be appointed by the board.
g. The board should ensure that, in appointing members of the board committees, there is a balanced distribution of power in respect of membership across committees so that no individual has the ability to dominate decision making and undue reliance is not placed on any individual.
h. The Company Secretary, or any other officer in the office of the Company Secretary, should be the secretary of all board committees.
i. The timing of committee meetings should be well coordinated for the effective discharge of their duties.
j. At board meetings, the chairman of each board committee should present a written report of the key recommendations made at all the meetings held by the committee since the last board meeting.
Effective board committees are indispensable for successful boards and serve to ensure that the board is able to make the most efficient use of its time in order to focus on strategy issues.
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