Corporate Governance

Instructor: Dr. Asem Tahtamoni

Subject: Board Committees and Corporate Governance
Done by: Malek Al-Atrash

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 Table of contents
Page
3 Abstract
4 Introduction
5 Relevance of Committees
6 Audit Committee
7 Remuneration Committee
8 Risk management Committee
9 Nominating Committee
10 Conclusion
11 References

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 Abstract
Corporate Governance is needed to create a corporate
culture of consciousness and transparency. It enables a
company to maximize the long term value of the company
which is seen in terms of performance of the company. In
this project, I’ll provide you with information of the main
committees required in every organization.

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 Introduction
Corporate governance is a system of law and sound approaches
by which corporations are directed and controlled focusing on
the internal and external corporate structures with the intention
of monitoring the actions of management and directors and
thereby, mitigating agency risks.

Board committees are needed to complete an organizations plan

in order to avoid uncertainty.

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 Relevance of Board Committees

The establishment of board committees can bring more focus to

the board’s oversight function by giving proper authority and
responsibilities and by demanding accountability for these
committees. Listing standards of national stock exchanges require
that listed companies form at least four board committees that
must include audit, remuneration, risk management and
nominating committees. Public companies often, in addition to
these four mandatory committees, have governance and other
committees such as finance, IT, and disclosure.

Corporate governance is important in all but the smallest

organizations. Limited companies have a primary duty to their
shareholders, but also to other stakeholders as described above.
Not-for-profit organizations must also be directed and controlled
appropriately, as the decisions and actions of a few individuals can
affect many individuals, groups and organizations that have little
or no influence over them. Public sector organizations have a duty

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to serve the State but must act in a manner that treats stakeholders
fairly.

Audit Committee
An audit committee is an operating committee of the board of
directors charged with oversight of financial reporting and
disclosure. Committee members are drawn from members of the
company's board of directors, with a Chairperson selected from
among the committee members. A qualifying audit committee is
required to be listed on a stock exchange. Audit committees are
typically empowered to acquire the consulting resources and
expertise deemed necessary to perform their responsibilities.

The audit committee is a committee of the board of directors

responsible for oversight of the financial reporting process, selection
of the independent auditor, and receipt of audit results both internal
and external. The committee assists the board of directors fulfill its
corporate governance and overseeing responsibilities in relation to
an entity’s financial reporting, internal control system, risk
management system and internal and external audit functions. Its
role is to provide advice and recommendations to the board within
the scope of its terms of reference / charter. Terms of reference and
requirements for an audit committee vary by country, but may be
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influenced by economic and political unions capable of passing
legislation.

Remuneration Committee

A remuneration committee is established to ensure that remuneration

arrangements support the strategic aims of a business and enable the
recruitment, motivation and retention of senior executives while also
complying with the requirements of regulation.

The remuneration committee should have delegated responsibility for

setting remuneration for all executive directors and the chairman,
including pension rights and any compensation payments. The
committee should also recommend and monitor the level and structure
of remuneration for senior management. The definition of senior
management for this purpose should be determined by the board but
should normally include the first layer of management below board
level.

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 Risk management Committee

Is a committee responsible for managing risks that could occur to an

enterprise with complete oversight. Enterprise risk management is
included in business which consists of the methods and processes used
by organizations to manage risks and seize opportunities related to the
achievement of their objectives. Enterprise risk management provides a
framework for risk management, which typically involves identifying
particular events or circumstances relevant to the organization's
objectives, assessing them in terms of likelihood and magnitude of
impact, determining a response strategy, and monitoring progress. By
identifying and proactively addressing risks and opportunities, business
enterprises protect and create value for their stakeholders, including
owners, employees, customers, regulators, and society overall.
Enterprise risk management can also be described as a risk-based
approach to managing an enterprise, integrating concepts of internal
control, and strategic planning. Enterprise risk management is evolving
to address the needs of various stakeholders, who want to understand the
broad spectrum of risks facing complex organizations to ensure they are
appropriately managed. Regulators and debt rating agencies have
increased their scrutiny on the risk management processes of companies.

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 Nominating Committee

Is a group formed for the purpose of nominating candidates for office or

the board in an organization. It may consist of members from inside the
organization. Sometimes a governance committee takes the role of a
nominating committee. Depending on the organization, this committee
may be empowered to actively seek out candidates or may only have the
power to receive nominations from members and verify that the
candidates are eligible.

A nominating committee can be formed for the purpose of nominating

persons or things held up for judgment by others as to their comparative
quality or value, especially for the purpose of bestowing awards in the
arts, or in application to industry's products and services. The objective
being to update, set, and maintain high and possibly new standards.

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 Conclusion
Board committees are a way to achieve effective corporate governance.
It’s very important to select the best committees for any organization to
make its own direction well-controlled.
I am glad that I have been experienced from this topic; it helped me so
much to increase my knowledge in corporate governance and in writing
a project/report.

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 References
*Shailer, Greg. An Introduction to Corporate Governance in Australia,
Pearson Education Australia, Sydney, 2004

* "OECD Principles of Corporate Governance, 2004, Articles II and III"

* "Report of the SEBI Committee on Corporate Governance, February

2003.

* Cadbury, Adrian, Report of the Committee on the Financial Aspects of

Corporate Governance, Gee, London, December, 1992

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