A governance committee often oversees who serves on the board of directors, but it also handles other responsibilities. Here's a look at them.
Tasked with the important job of oversight, the board of directors of your company or organization is responsible for ensuring overall good governance. Boards of all kinds, whether for-profit or nonprofit, typically appoint and rely on a governance committee to help carry out this due diligence, while essentially providing oversight to the board itself.
A governance committee typically oversees who serves on the board of directors, as well as playing a central role in the selection and compensation of executive-level roles in the organization. A corporate governance committee might also help boards stay compliant with meeting state and federal regulatory requirements for that industry.
For instance, public corporations are bound by the U.S. Securities and Exchange Commission (SEC) rules and requirements, whereas health care organizations make HIPAA compliance a top priority. Also bound by board committee charters, many nonprofit boards must strategize and communicate with stakeholders.
What You Need to Know about a Board’s Committee Structure
All boards create committees to explore, oversee, and manage certain areas of the organization. These committees delve deeper into the subject matter, consult with others inside or outside the organization, and report back to the board.
The board’s committee structure typically separates responsibilities based on internal and external auditing, compensation and benefits for staff, compliance and risk management, and governance of the board itself. For some boards, the governance committee structure allows for oversight of all of the above.
Put simply, a board establishes a governance committee definition to inform the committee’s responsibilities to make sure the board follows its own rules and obligations.
When defining “what is a governance committee” for your organization, look no further than your committee charter. This organizational defining document should outline the duties of the governance committee and clearly direct its members toward a specific purpose.
Committee Charter Outlines Governance Committee Roles
The governance committee charter spells out the governance committee responsibilities, decides who serves on the committee, and defines the specific governance committee roles to be performed.
Purpose of the governance committee
What does a governance committee do? To determine its purpose, check the organization’s governance committee charter or compare your corporation’s governance standards with those of competitors to see how yours stacks up.
Corporate governance committees must first state whether they’re serving as a standing committee — one that continuously meets to monitor and manage critical issues for the organization — or an ad hoc committee formed to handle one-time special projects.
The purpose of the governance committee might include: oversight and evaluation of board performance; conducting board committee assessments; board member recruitment and nomination; completing annual audits; and meeting compliance and regulatory requirements. Committee members also stay current on best board governance trends.
Governance committee membership
The governance committee charter also dictates how many members should serve on the governance committee, and the process by which members are appointed or removed. Most committees in corporate governance include at least three members, and appoint a chairperson or co-chairpersons with full board approval.
In addition to certain board members, governance committees often include the CEO of the organization, the board administrator, as well as several non-executive directors to encourage good communication among the governance committee, the board, and management.
The governance committee membership section might also define other responsibilities and requirements, such as tenure on the board, industry expertise, service on other standing committees, and more.
Authority of the governance committee
It’s up to your organization’s board to decide how much authority to give its governance committee. Since this committee provides board oversight and periodically conducts board assessments, it’s important to give governance committees unrestricted access to all board members and employees.
Oftentimes, governance committees need to gain better understanding about a topic or issue by meeting with employees and other board directors or requesting specific reports, so it’s important to encourage good cooperation.
Boards can also authorize their governance committees to seek help from outside consultants, whether searching for advice on how to handle a sensitive subject matter or hiring a search firm to recruit qualified board candidates.
Responsibilities of the governance committee
A governance committee performs a central role for most boards, helping to gauge its overall effectiveness and performance. Its responsibilities vary, depending on the size of the board and industry.
Here’s a list of some common responsibilities for governance committees:
- Oversees board compliance with company’s charter, articles, or bylaws.
- Helps to create a board-member recruitment strategy, including job descriptions.
- Conducts board assessments and makes recommendations on who gets appointed, who gets retained, and who gets removed.
- Organizes new board member orientation, onboarding, and training.
- Monitors governance trends to guide the board on changes to regulatory compliance.
- Helps to create a governance committee charter to know what directives the committee needs to follow to best serve the organization.
- Organizes continuing education and training opportunities to help board members develop and grow.
- Reviews and updates the organization’s bylaws periodically to keep policies and procedures up to date.
- Makes recommendations for committees and other board structural changes.
- Seeks legal counsel to advise on best ways to deal with conflicts of interest.
- Helps to review and approve policy changes suggested by management.
Director Nomination and Evaluation
With board oversight as its main responsibility, it simply makes sense to authorize your board’s governance committee to recruit other potential board members and outline the specific qualifications needed to fill those board member roles. They know what an ideal board member looks like, and can dive into the particulars for each candidate.
To form a diverse board, governance committees generally consider a range of people with differing views and life experiences, as well as such factors as age, race, gender, educational background, and professional qualifications. They also consider community leadership and involvement, as well as potential conflicts of interest.
Once the committee identifies good board member candidates, it typically makes nominations to fill any vacancies during annual elections.
What Changed for Boards in 2021?
Board and Committee Evaluation
While many public corporations are legally required to perform annual board and committee evaluations, nonprofit boards face no legal requirements to do so. However, nonprofit boards can benefit from the insights gleaned through an annual checkup, so to speak.
What’s working, what’s not, and what needs an update? Governance committees can help determine the answers to those questions by checking in annually to conduct an evaluation of the entire board, its committees, and each individual director.
Monitoring the Effectiveness of the Governance Committee
Boards often rely on their governance committees for guidance on providing best board governance, and the full board must periodically review its governance committee performance.
In addition to recruiting individual board directors, governance committees also perform annual evaluations of the entire board, all its committees, and individual directors to see how things are going and where improvements may be needed.
With a renewed focus on diversity, equity, and inclusion (DEI) in board composition, as well as major technology changes affecting organizations across the globe, some organizations are starting to add shareholder engagement and risk management to their list of governance committee duties.
Frequently Asked Questions
Who does the governance committee report to?
The governance committee reports to the full board, and the full board should review the committee’s performance on a periodic basis.
How often should the committee meet?
Ideally, the governance committee meets every month to consider specific items on its agenda, or at least quarterly.
Who appoints and removes the members of the governance committee?
The organization’s full board appoints members to its governance committee. While the board may consider recommendations from the committee, it also retains the power to remove members from the governance committee.
The Bottom Line on Corporate Governance Committees
As certain economic factors and new technology pose new risks for companies, a strong corporate governance committee can help boards improve their overall effectiveness.
With optimized board collaboration tools and customized controls to handle sensitive data, OnBoard Board Management Software helps governance committees perform their roles at an optimal level.
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