BOARD COMMITTEE AND THEIR FUNCTIONS

BOARD COMMITTEE AND THEIR FUNCTIONS

An effective Board is the hallmark of good corporate governance. Board Committees enables the Board achieve greater efficiency in the performance of its oversight functions and strengthening the governance structure.

Board Committees generally lighten the workload of the Board by focusing on specific issues and carrying out the required due diligence in order to provide comprehensive recommendations required for the Board to make informed decisions. Board Committees are made up of directors and their responsibilities and duties must be clearly defined in board-approved Committee charters which should be drafted by the company secretary and reviewed periodically.

Principle 11 of the NCCG provides that:
“to ensure efficiency and effectiveness, the Board should delegate some of its functions, duties and responsibilities to well-structured Committees, without abdicating its responsibilities.”

The Requisite Board Committees
To facilitate adequate oversight, the Nigerian Code of Corporate Governance 2018 recommends that the Board should establish Committees responsible for Nomination and Governance, Remuneration, Audit and Risk Management. Each Committee should be composed of at least three members.

1. NOMINATION AND GOVERNANCE COMMITTEE: the Committee is responsible for overseeing the annual performance evaluation of the Board and establish a formal criteria and transparent process for Board appointments, re-appointment and recommendation of suitably qualified members to the Board or its Committees as well as have an input into Succession Planning. The Committee should work with the Company Secretary to arrange induction and training programmes for Directors. 
2. REMUNERATION COMMITTEE: This Committee is required to develop and recommend to the Board, a formal, clear and transparent framework for the Company’s remuneration policies and procedures. It is advised that all or a majority of the remuneration Committee members should be Independent Directors. 
3. THE BOARD AUDIT COMMITTEE: The Board Audit Committee recommended by the Code is separate from the Statutory Audit Committee required by Section 359 (3) of the Companies and Allied Matters Act (CAMA). The Code recommends that all members of the Committee should be financially literate whilst at least one member should be a financial expert. The Board Audit Committee is specifically required to ascertain the integrity of the Company’s financial statement, assess the independence of the external auditors, develop and oversee the internal audit function. The Committee oversees the relationship with external auditors to ensure the quality of the company’s financial statements.

1. RISK MANAGEMENT COMMITTEE: establishes the risk management framework and policies and recommends for approval of the Board. The Committee should review the level of the Company’s compliance with regulatory requirements and also conducts an annual review of the Company’s Information Technology (IT) data governance framework to mitigate IT data risk. The decision whether the Board should establish the committees as stand-alone or to merge the functions largely depends on the needs of the Company.

Some of the recommended practices for Board Committees as provided by the NCCG include the following:

• The Board should determine the number and composition of its committees as well as ensure that each is comprised of directors with relevant skills and competencies. 
• Only directors may be members of Board Committees, while members of senior management may be required to attend Committee meetings. 
• The membership of Board Committees should be reviewed and refreshed periodically. 
• Each committee should be composed of at least three members. Individual Board Committee charters will indicate where independent non-executive directors are required. 
• The chairmen of Board Committees should be appointed by the Board. 
• The Board should ensure that, in appointing members of the Board Committees, there is a balanced distribution of power in respect of membership across committees so that no individual has the ability to dominate decision making and undue reliance is not placed on any individual. 
• The Company Secretary, or any other officer in the office of the Company Secretary, should be the secretary of all Board Committees. 
• The timing of Committee meetings should be well coordinated for the effective discharge of their duties. 
• At Board meetings, the chairman of each Board Committee should present a written report of the key recommendations made at all the meetings held by the Committee since the last Board meeting. 
• Effective Board Committees are indispensable for successful Boards and serve to ensure that the Board can make the most efficient use of its time in order to focus on strategy issues.

In conclusion, it is of importance to note that beyond regulatory compliance, Board Committees if properly structured are indeed quite useful to the overall efficiency and effectiveness of the Board. The need for Committees is premised on the need for the Board to focus on more strategic issues and leave Committees to deal with specific matters, take informed decisions within the framework of delegated authority and make recommendations to the Board. By delegating tasks to Committees, Boards can spend the time more efficiently on strategy. Committees are at liberty to seek independent professional advice at the expense of the company and seek clarification from senior management as required.

REFERENCES:

1. The Nigerian Code of Corporate Governance, 2018 Principle 11: Board Committees
2. The role of Board committees under the Nigerian Code of Corporate Governance 2018
3. The Nigerian Code of Corporate Governance 2018.

For further discussion and assistance with filing any of your organization’s compliance returns to the Corporate Affairs Commission, as well as providing you with Board Evaluation and Nominee services, please contact us at contact@firstfiduciary.ng