A board of directors is accountable for the strategic planning and decision-making processes for their company based on their vision, goals and principles. They can do so because they are a group of individuals elected by the shareholders to hold control over the company and its assets.
But boards are busy, and it isn’t always feasible for them to meet and tackle all of the important issues that nonprofits face on a daily basis or in an emergency. A lot of boards form an executive committee to address these issues. An executive committee is composed of a group that has strong leadership connections. They can be quickly gathered to tackle the most pressing issues facing the board.
The executive committee is a consultative body for the board. They are more likely to meet regularly, move fast and are able to tap into research results to offer recommendations to the board. This lets the board concentrate on issues of higher importance and delegate the smaller issues to the committee to deal with.
The executive committee will also often play the leadership role in developing the board by offering training, mentoring and conducting self-evaluations on a regular basis. This helps to streamline many activities that the board has to perform and ensures everyone is on the same page regarding alignment and decision making.
It is essential that the executive committee, and the board of directors realize that they are accountable to the board. They will be required to provide regular minutes of meetings, documents and a list of votes. This is because in common law jurisdictions, directors are believed to as agents of the company and therefore must bind the company by their actions. This is a rule that was reinforced by the House of Lords in the 1909 case Turquand’s v Salmon and is widely accepted.