Governance and

Responsibility:
Board Committees

What is board committee?

Board committee is a committee set up by the
board, and consisting of selected directors (both
executive and non-executive), which is given
responsibility for monitoring a particular aspect of
the companys affairs for which the board has
reserved the power of decision-making.
The role of a committee is to monitor an aspect of
the companys affairs, and:
Report back to the board, and
To make recommendations to the board.

Remuneration committee
Remuneration Committee deals with the remuneration of
executive directors and senior managers
Some believe that the remuneration of directors should be
linked to company performance.
Level of remuneration should be sufficient to attract, retain
and motivate directors to do a good job, not overpay them.
There should be a final and transparent procedure for
developing policy on executive remuneration
No director should be involved in deciding his or her own
remuneration
The committee should be made up of independent NEDs.

Nomination committee
The Nominations Committee has the responsibility to
identify and recommend individuals for appointment to the
board and executive director.
Nomination committee should also consider:
The desirable size of the board.
The skills of the board members. Combined code recommends at
least one NED have financial expertise (aka qualified accountant).
The Nominating Committee should develop, maintain and review
the criteria to be used in the recruitment process and annual
assessment of directors (MCCG, 2012)
The board should establish a Nominating Committee which should
comprise exclusively of non-executive directors, a majority of
whom must be independent (MCCG, 2012)

Risk committee
This board committee would have oversight responsibility for
risk and internal control
Roles of risk committee

To agree with the RM strategy.

Receive and review RM reports from all operational departments.
Monitor overall exposure and specific risks.
Assess the effectiveness of the RM strategy.
Provide guidance to the main board.
Work with the AC on designing and monitoring ICs for the mitigation
and management of risk.
To assist in determining a companys risk appetite. The board will
determine the level of risk the company is willing and able to take on.

Audit committee
The audit committee is considered to be the most important board
committee.
At least three, or in the case of smaller companies, two, independent NEDs.
At least one member of the AC has recent and relevant financial experience.
To ensure that the external auditors are completely independent of the
company and its subsidiaries, and that they are working in the best
interests of the shareholders
To ensure that both the external and internal auditors have sufficient
resources to carry out their defined roles
To act as a mediator between management and auditors when there is
dispute
Advise the full board on audit and internal control functions. If the board
does not accept the ACs recommendation, it should include the reasons in
the annual report.

Why Audit Committee is beneficial to

an organisation
Independence of the external auditors. The committee selects the
external auditor and thus can eliminate some pressure that the
executive management might try to apply.
Competence of the external auditor. The committee also assesses
the competence of the external auditor.
Providing an assessment of the financial statements and audit
process. The committee reports to the board on matters that they
consider relevant, with regard to financial statements and audit
process. Its responsibility is to ensure that the statements are reliable.
Independence of the internal auditor. The committee helps to
ensure the independence of the internal audit function by having the IA
functionally report to the committee and not to someone in
management.
Increase public confidence.