Appointing board committees

The board of directors of a company may appoint any number of committees, and may delegate to any committee any of the authorities of the board in terms of Section 72 of the Companies Act This is subject to the provisions of the Memorandum of Incorporation.

Several leading experts have written about this subject and you can read some here:

The underlying principle is that the delegated authority of a committee enables the board to operate more effectively, knowing that appropriate attention and consideration would be given by the respective committees to the matters delegated to each. Each Committee thus plays a key role in ensuring that sound corporate governance is maintained.

Different committees

The following is a non-exhaustive list of board committees that boards typically establish.  In some cases the Companies Act requires that a committee be established.

  • Audit committee – annually appointed by the shareholders
  • Social and ethics committee – if the PI Score of the company exceeds 500 the appointment is mandatory. The mandate, responsibilities and powers of the committee are defined in sections 72(4) to (10) of the Companies Act.
  • Nomination committee
  • Remuneration committee
  • Risk management committee
  • Investment committee
  • Human Resources committee
  • Sustainability committee

Operating procedures 

The following non-exhaustive list of operating procedures are usually followed:

  • Each committee is constituted with appropriate written terms of reference that are reviewed and updated regularly by the Board.
  • With a few exceptions, each committees is chaired by an independent non-executive director. The chairman fulfills an important leadership role similar to that of the Chairman of the board in creating the conditions for overall effectiveness of the committee.
  • The committees meet regularly, or as required based on their terms of reference.
  • The processes followed are similar to that followed by the board, and the chairman of each committee reports to the board on the findings and recommendation of the board.  Important to note that the delegated authority of a committee is to only make recommendations to the board.
  • All committees are provided with sufficient resources to perform their functions properly. They are supplied with relevant and timely information from the management to enable members to discharge their responsibilities.
  • Committee membership is reviewed annually by the Board. In some cases the members of a committee is annually appointed by the shareholders in general meeting.
  • The Committees are also authorised to engage external advisers for independent professional advice as they consider necessary.

We have assisted the boards of a few clients to be assess and implement a number of board committees. This involved the development of the committee charters and briefing the board members on the role, function & processes of a board committee.

We can also do it for you. Call us for more details.

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