This is Joanne O’Brien from CRH Law talking to you today about Board Committees.
Board members of both for-profit and not-for-profit organizations will be familiar with a Board Committee structure. Boards use Committees as a way to manage their workload, and that’s particularly important for not-for-profit boards, where most members are volunteers.
There’s usually an audit risk and compliance or finance committee, a remuneration committee that might look after performance of the CEO, or a committee about a special or particular project. How do you manage the work of those committees, and how does a board keep control of what’s happening with its committees? Because ultimately, the board is still responsible for all things that happen within the board structure, including any decisions taken by its committees. I think there’s probably four golden rules to this about how you actually manage your committees.
The first is making sure that you’ve got the right people on each particular committee. It’s an opportunity to potentially get in people from outside the organization that might have particular expertise that can advise the committee about a particular subject.
Secondly, it’s important to have proper terms of reference or a charter for your committee so they know exactly what it is that they’re responsible for and they know the limits or the boundaries around any decision making authority that they might have.
Thirdly, it’s regular reporting. When does the committee report back to the board, and how much detail is to be in those reports?
Fourthly, it’s a requirement to regularly review those terms of reference and the activities of the committee to see if it’s still effective and valuable.
Four rules: One, make sure you’ve got the right people on the committee. Two, have proper terms of reference. Three, ensure there’s regular reporting, and four, make sure there’s a consistent process for review of the committee work. In that way you can have effective, functioning committees as well as a board that’s still making sure it’s responsible for decisions taken on behalf of the organization.