Build a Better Board
Companies benefit when they recognize board committees’ important role in corporate governance.
Carolyn Geason-Beissel/MIT SMR | Getty Images
The phrase “effective corporate governance” may conjure up the image of a full board of directors sitting around a table, but committees are where most of the real work of the board happens. Committees are the small groups whose work remains out of the spotlight; they are where people have the opportunity to ask questions, trade-offs can be considered, actual debate happens, and recommendations are formulated to be presented to the entire board. Because they are small groups, committees are also an essential mechanism for getting more input from each individual director. That is why most directors spend far more time in committees than in full board meetings.
The focus on full board meetings rather than committees is unfortunate because it means that there has not been much research on board committees. In our decades of professional experience, we have interviewed hundreds of directors and spent endless hours supporting and participating in board committees. Some of those committees were highly effective, but, unfortunately, plenty were not. So, what sets the effective apart from the ineffective?
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The Role of Committees in Effective Boards
Committees are a useful tool for managing and maximizing a boards’ value in several ways. First and foremost, they are the primary platform for director participation and engagement. Full board meetings are not always great places for all directors to contribute fully. There may be different reasons for this, such as the directors’ personalities, lack of an inclusion effort for new members and/or members who represent a minority perspective, or the presence of certain types of board members who are likely to dominate meetings (even if they are ill-prepared). For example, status hounds — people who believe that their own reputation should be sufficient to persuade others — tend to overshadow opposing opinions.
Given that time is usually short in full board meetings, it is far too easy to simply defer to the expert in the room on a given topic rather than engage in debate and ask detailed questions.