committee charter

Committee Charter Best Practices

To help the board of directors carry out its duties effectively, four committees are dealing with specific issues. In this article, we will consider committee charter best practices and their benefits for corporate management structure.

The purpose of the committee charter

The best corporate governance practices are recommended to expand the standard structure. Namely, to include permanent and temporary committees and the position of corporate secretary in the working bodies of the supervisory board of the joint-stock company. Standing committees help the council to overcome the lack of awareness that may result from the occasional participation of board members in the activities of the company, and to consider issues that require more detailed and in-depth study.

Temporary committees are formed by the supervisory board if necessary to coordinate certain issues of the company, in particular, to study the consequences of potential reorganization of the company, to conduct official investigations into abuses of officials, and more. Thus, the supervisory board may delegate some of its powers to committees that include a number of its members. Meetings of the committees are held as needed, but at least three times a year. They are held separately to give additional attention to decisions that require prior review by the board.

Decisions of the committees are taken by a majority vote of all members of the committee present at the meeting. Each member of the committee has one vote; in case of equality of votes, the chairman’s vote is not decisive.

Following the Articles of Association, the following committees may be created under the board of directors of the company:

  • audit committee;
  • human resources and remuneration committee;
  • strategy and development committee;
  • security committee.

World experience shows that the boards of Western corporations often have an executive committee, one or more control, and various special committees. The main task of the executive committee is to work on an ongoing basis to address issues that arise between meetings of the board and require immediate consideration. The executive committee should report regularly to the entire board, and other members of the supervisory board should be able to review the minutes of all committee meetings.

Control committees play a particularly important role. As a rule, these committees focus on some specific governance issues, which they study in detail and on which they formulate certain recommendations.

What are board committee charters?

The necessary conditions for the effective development of modern organizations and joint-stock companies in the long term are an effective board of directors of the company and a well-thought-out management system. The activity of the committees of the board of directors is regulated by the chart. The goal of the committee charter can be defined by the following points:

  • to develop a set of corporate governance policies for the company and to recommend those policies to the board of directors;
  • to identify persons qualified for appointment to the board and, following criteria approved by the board, making recommendations to the board regarding candidates for board membership;
  • assisting the board in oversight the company’s corporate responsibility and sustainability policies and programs;
  • and overseeing board and management evaluations.

The chair of the committee is determined annually by the board of directors. Vacancies are to be filled by appointment by the board and committee members can be removed by the board. The committee has the power to delegate any function or duty to a sub-committee composed of one or more members of the committee.