Board Committees
Board Committees
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Improving Board effectiveness
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CTP Global works with Boards to improve the effectiveness of their committees.
In particular with regard to committees we:
¦ Provide assistance with structures
¦ Regularly conduct reviews
¦ Draft Committee Terms of Reference, often in terms of powers
¦ Facilitate initial meetings of committees
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As company structures and regulation become more complex there is an increasing need for more clearly defined sub-committees of the central Board. Board committees vary in their size and remit according to the type of business and perhaps the biggest requirement is on financial companies (BOFIs). The European Commission has issued additional guidance along with the Walker Review, FRC Combined Code (now the UK Corporate Governance Code), MEDEF, OECD and others.
Audit Committee
Under the Combined Code companies are required to have an Audit Committee or explain their reason for not doing so. For all financial services firms this is mandatory. The role of the Audit Committee relates to financial reporting, internal audit, external audit, internal financial controls and risk management (unless there is a separate Risk Committee established) and whistleblowing. This committee is required to comprise only independent directors and in the case of fs firms at least one must have significant recent and relevant experience.
Nominations or Appointments Committee
There are specific requirements of the membership and role of Nominations Committees. The membership should consist of a majority of independent directors. The committee should be prepared to answer any questions at the AGM.
Remuneration Committee
Every company is required to consider certain aspects of remuneration, particularly in relation to risk, directors and senior management remuneration, appropriateness of short-term and long-term incentives and rewards, and use of external consultants. Committee membership should be wholly sourced from independent directors. International policy is gradually being aligned and in the UK PS09/15: Reforming Remuneration Practices in Financial Services was issued in August 2009 outlining UK changes and progress with international policy.
Risk Committee
There is an increasing call for all financial institutions to have a Risk Committee separate from the Audit committee and with a different remit and membership, although an overlap of membership is often appropriate and unavoidable. This should not simply be an extension of compliance, but should provide oversight and advice to the Board on the current risk exposure, future risk strategy and appetite of the company.
The Board and the Risk Committee must be served by a Chief Risk Officer who serves no individual business unit and has a business-wide remit. The Risk Committee should also be able to draw on appropriate external resources to challenge its analysis and assessment. It should also oversee a due diligence process of all proposed acquisitions or disposals. The Risk Committee should produce a report which forms a separate section of the company’s annual report and accounts. The Risk report should contain information regarding number and frequency of meetings, membership, and details of any external advice taken.
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CTP Global – Good Governance: Great Performance
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