Committees of A Board: Resource Person: Rabia Aziz

Committees of a board
Resource person:
Rabia Aziz
Recording of this session via any media type is strictly prohibited.
Page 1
Committees of a board
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Board committees normally function
independently from each other, are provided
with sufficient resources and authority, and
are evaluated by the board of directors.
THUS board committees are a subset of the
board and perform specific functions that
assist the board in discharging its advisory and
oversight responsibilities.
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Why Board Committee?
Board committees are important tools to make
aboard more effective. These committee help
to make specific idea and in-depth
observation in any matter related to the
governance of the corporation. Audit
committee is one of them.
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An exploratory committee would be made up of
a group of individuals who have the skills
to examine an issue, carry out research
regarding that issue, and present their
findings to the board.
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The role of an implementer committee is to take
action. These committees should have
representatives with the characteristics
discussed in the members of advisory and
explanatory committees, along with experience
at both policy and operational levels.
Members must have the ability to implement
their recommendations once they have been
approved by the board.
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It is the board’s responsibility to clearly state the
scope of authority the committee is
delegated. Written terms of reference, or
guidelines, for the committee will help avoid
future misunderstandings of the purpose and
authority of the committee.
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Major Committees of the Board
Audit Committee
The Executive Committee
The Compensation Committee
Nomination Committee
Governance Committee
Risk Management Committee
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Audit Committee
composed of at least three independent
directors; should be formed to implement and
support the oversight function of the board,
specifically in the areas related to the internal
controls, risk management, financial
reporting, and audit function.
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vital role of an audit committee
Ensuring the integrity of financial controls and
integrated reporting (both financial and
sustainability reporting), and
identifying and managing financial risk.
The appointment of an audit committee is
regulated as part of the enhanced
accountability and transparency requirements
Page 10
The audit committee must be appointed by the
shareholders at every annual general meeting
All audit committee members must be directors
(members of the board), it is important that the
nominations committee identifies suitably
skilled and qualified individuals to nominate for
appointment to the audit committee.
The shareholders may appoint anyone they deem
fit and proper.
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Audit committee must consist of at least three
members. Each member of the committee must be
a director of the company and not:
• be involved in the day to day management of the
company for the past financial year;
• be a prescribed officer or full-time employee of
the company for the past 3 financial years;
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be a material supplier or customer of the
company such that a reasonable and informed
third party would conclude in the circumstances
that the integrity, impartiality or objectivity of
that director is compromised by that
relationship; and
• be related to anybody who falls within the
above criteria.
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The statutory duties of the audit
committee include:
• making submissions to the board regarding the company’s
accounting policies, financial controls, records and reporting
• nominating an auditor that the audit committee regards as
independent
• determining the audit fee
ensuring that the appointment of the auditor
complies with the Companies Act and other relevant legislation
• determining the nature and extent of non-audit
services
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• preparing a report to be included in the annual
financial statements describing how the
committee carried out its functions, and
commenting on the financial statements,
accounting practices and internal financial control
measures of the company
• receiving and dealing with relevant complaints,
And any other function designated by the board
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Compensation committees
It is the crucial element of good corporate
governance to establish a committee whose
sole focus it is to consider and recommend
the level and form of the directors’ (and
senior management’s) remuneration.
Page 16
One of the most important responsibilities of the
members of the committee is to remain up to date
on appropriate levels, structuring methods and
types of remuneration in the environment in
which the company operates.
The members of the committee are required to
maintain a fine balance between recommending
over-generous remuneration which is not in
the interests of the shareholders, and a level of
remuneration which fails to attract the desired
quality of individual to the board.
Page 17
Compensation Committee
composed of at least three independent
directors; serves to design, review, and
implement ‘directors’ and ‘executives’
compensation plans.
Page 18
Governance Committee
consist of both executives and nonexecutives
directors; should be established to advise,
review, and approve management strategic
plans, decisions, and actions in effectively
managing the company.
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Risk management Committee
There are two reasons that this committee should
report audit committee
The first is that, as a consequence of the
composition of the committee, the function will
often have financial focus when risk management
should correctly extend far beyond the finances
of a company.
Secondly, the audit committee should act as an
independent oversight body.
Page 20
committee should have at least three members,
and may comprise executive and non-executive
directors, and even non-directors.
The chairperson of the committee should be a
non-executive director. The chairperson of the
board should not chair this committee, but may
be a member.
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It is more important that members of the risk
committee have experience within the industry.
This would allow them to identify areas of risk
and be aware of the appropriate methods of
managing the company’s exposure via internal
(the control environment) or external (such as
thorough insurance cover) means.
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To operate effectively, it is recommended that
the committee produces reports that are
reviewed and signed by the full board as
acknowledgment that their responsibilities in
this regard have been adequately discharged.
Page 23
The Nomination Committee
The role of the nomination committee is to
review, on a regular basis, the composition of
the full board, and where it appears that the
board is lacking in skills or experience in a
certain area, to identify how best to rectify the
situation.
This may involve identifying skills that are
required, and those individuals best suited to
bring these to the board.
Page 24
One of the important considerations for the
committee is whether there are adequate
succession plans in place to mitigate the effects
of losing key members of the board, specifically
non-executives as these individuals may be more
difficult to replace than executive directors who
have followed a defined career path through
the management of the company.
Page 25
Nominating committee
composed of at least three
independent directors; should be
formed to monitor issues pertaining to
the recommendations, nominations
and elections activities of directors.
Page 26
Disclosure committees
this committee is usually led by
corporate counsel, CFO’s, or
controllers. It is responsible for
reviewing and monitoring the
company’s SEC fillings, earning
releases, materiality issues, conference
call scripts, and presentations to the
investors by senior management.
Page 27
Special committee – the board of
directors may form a special committee
to assist the board in carrying out its
strategic and oversight function,
including financing, budgeting,
investment, mergers and acquisitions.
Page 28
How Effectiveness of Different
Committees Can be Ensured?
When committees of the board are established,
their mandate, composition and working
procedures should be well defined and
disclosed by the board.
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Committees of a board

Recording of this session via any media type is strictly prohibited.

Recording of this session via any media type is strictly prohibited.

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