There is much debate over the role of the executive committee in the governance space.
This contentious issue has divided Board members and management alike as professionals struggle to find the right balance between the executive committee and the CEO. Executive committees act as a subset of the Board, empowered to respond to urgent tasks with the necessary authority. As such, they are a major player in the business and governance world. They are involved in the age-old debate over the role of CEOs versus Boards.
It can be easy for companies to fall into the traps of traditional governance models and rely on the powers of executive committees without questioning their authority. Whilst their role is strongly debated, there are arguments to be made on both sides, and business leaders tend to feel passionate about one perspective over the other. This may lead to internal biases being played out in company structure, as members prioritise and defer to an executive committee or actively disregard its vested power.
If you are searching for clarity amidst this hot debate, look no further. The BoardPro team have outlined both sides of the issue in an effort to reach an effective and productive conclusion.
Pro-Executive committees
When a Board is considering forming an executive committee, it is important to take a moment to reflect on if the new committee would add value to the functioning of the Board. If the new committee would do anything other than increase efficiency and effectiveness within the organisation, then the Board should steer clear of forming that committee.
It is also important to make sure that an executive committee is regulated by bylaws once formed. These should clearly outline its purpose and authority so that there are clear limits to its power and everyone within the company is on the same page. Bylaws are particularly important when an executive committee is given the power to act on behalf of the Board – limits must exist that define its authority.
This will help the executive committee speak confidently for the entire Board without anyone feeling as if they have been left out of the decision-making process. Decisions made by the executive committee should always be confirmed by the full Board at its next meeting so that everyone is kept in the loop and the executive committee’s power is balanced in a productive manner.
Anti-Executive committees
Executive committees often meet when there is an emergency in their organisation that must be dealt with right away. Rather than struggle to assemble the whole Board, the executive committee may be called. However, what better time to seek the entire Board’s insight than in a company crisis? The excuse of difficult logistics for all members no longer holds water with the increase of remote working capabilities. Giving the entire Board a voice on urgent matters will level the playing field.
Another key argument in favour of executive committees is their intimate atmosphere and confidentiality. That being said, this approach can stratify the Board and encourage secret-keeping. Simone Joyaux sees knowledge sharing across the Board as “the right and responsibility of the full Board.” “Governance is the legal and moral authority of the full Board,” she affirms.
Having excess committees on a Board can also simply waste time, as members struggle to balance their duties between the general Board and their many committees. If directors are continuously navigating between the committee and greater Board roles, they are wasting time on separate meetings that could more easily and efficiently be conducted with the whole group.
One key task of the executive committee is the evaluation of the CEO. But this need not belong strictly to the executive committee. An ad hoc task force or focused project assignment could be just as effective. Why dedicate an entire committee to accomplishing a task that spans a few months at best?
The bottom line for those that view executive committees as extraneous is that time spent in committee meetings is time wasted. Information is often rehashed from general Board meetings and rarely does productive discussion take place. Executive committees spend much of their time reprocessing information and work from other committees. This creates added steps in the information food chain and sets up communication barriers and delays.
Rather than going straight to the problem-solving source – the Board at large – information can get caught up in a web of committees. As Joyaux states, “Governance belongs to the full Board, not to any single Board member or committee.”
There are undoubtedly arguments to be made on both sides of the field. Whilst some see the need for executive committees within the governance space in order to improve company efficiency – particularly when it comes to dealing with pressing matters – others see them as part of an antiquated system that encapsulates a power divide within their organisation. Finding the right balance of power for the executive committee will depend on the needs of each individual organisation. Ultimately, it comes down to clearly defining its roles and responsibilities at the onset so that all members may work best in tandem to fulfil the goals of the company.
To read through both sides of the debate on Board power versus CEOs, as well as continue to understand this topical governance issue, visit our blog here.
