Board Committees are established to assist the Board in dealing with specific focus areas within a framework of delegated authority in its role of providing leadership. This delegation of authority allows Committees to focus on the nitty-gritty details, therefore allowing the Board to take a bird’s eye view and still be able to make informed strategic decisions. The expertise, ability to spend time on details, and focus on the scope of work assigned to each Committee under a charter means that Board Committee are able to have in-depth conversations and make well considered recommendations to the Board.
The Nigerian Code of Corporate Governance under Principle 11provides that the Board can exercise its powers through Committees consisting of such members as the Board shall deem fit, without abdicating its responsibilities. Also, while there is no hard and fast rule on the number of Board Committees, the Nigerian Code of Corporate Governance recommends that the Board should establish, at least, Committees responsible for Nomination and Governance, Remuneration, Audit and Risk Management.
To enable Board Committees function optimally and create the value for which they are established, it is imperative to set up a framework for an effective committee system. The first step is to consider and approve a Committee Charter. Committee charters set out the Board’s expectations, terms of reference, duties, responsibilities, authority, composition, tenure, meeting procedures, etc. of each Committee. Charters also infuse the peculiar corporate preferences, global corporate governance best practices and governance requirements of the relevant Codes and guidelines on corporate governance. The Committee Charter provides committee members a clear idea of what is expected of them, and this allows for focus and efficient use of time and resources. A periodic review of the Charter to ensure it continues to reflect the role and responsibilities of by the Committee, current trends and regulatory requirements.
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Another way of optimizing Board Committees is by ensuring accountability to the Board through keeping accurate records of Committee deliberations. The usual practice is to prepare a formal report of proceedings and resolutions, which are then presented by the Committee Chairman to the Board for consideration. In as much as the Board has delegated some of its powers to Board Committees, it retains responsibility. In this regard, Committees make recommendations to the Board for consideration and approval as appropriate. It is however not good practice for the Board to make a habit of re-litigating matters that the Committees have carefully considered.
Board Committees are also expected to conduct annual self-evaluations to determine to what extent they have been able to meet pre-determined annual goals and report the outcome of the assessment to the Board Chairman.
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The quality of Board composition is also critical to the effectiveness of Board Committees. The Committee Chair should not only possess the necessary educational qualification and experience but should have relevant people skills, be a strategic thinker and be able to direct the flow of discussions at meetings. Generally, the Committee should be constituted of persons with the relevant skills and expertise and willingness to spend time and effort on committee work. The Committee should also be independent of undue influence from a dominant persona – a major reason why the Board Chair is not expected to be a member of Board Committees. It is also good practice to periodically refresh the membership of Committees to introduce new ideas and perspectives and also rotate membership so there is a transference of ideas, and each committee member becomes knowledgeable across Board.
Whilst it is expected that Committee members are sufficiently skilled to handle the matters assigned to their respective Committees, they are not expected to know every technical detail. Accordingly, Board Committees are at liberty to seek external professional advice or such other resource in the discharge of their responsibilities. The Committee Charter should empower the Committee in this regard. The Committee should also be able to access information; whether in the form of reports from Management of access to relevant members of staff.
Some administrative tools such as effective time management can also be employed to make the best of Board Committees. There should be a clear and concise agenda for each Committee meeting with time allocated per item to foster focused and orderly conversations. It is also important that Committee packs are made available well ahead of committee meetings. The Committee Chair should encourage meaningful contributions and robust discussion and ensure that the flow of conversation does not turn away from the strategic objectives of the Committee.
An effective Committee system is one of the signposts of an effective Board. The Board should not approach Board Committees from a compliance perspective, but rather from an appreciation of the significant utility Committees bring to the work of the Board.
Bisi Adeyemi is the Managing Director/CEO, DCSL Corporate Services Limited. Kindly forward comments and reactions to [email protected]
