A key objective of any board of directors is making the most effective decisions as efficiently as possible. But the subjects and problems boards are asked to weigh in on are complex and often require a broad range of expertise to properly address. Committees help ensure each item receives a fair amount of discussion and consideration. Most boards require a formal charter be written before a new committee can be created. Let’s take a closer look at how to write a great committee charter and the role they play in governance.
What is a Committee Charter?
Directors can file a motion to create a new committee. Newly-created committees rely on charters to dictate how they operate. A well-written charter can set a committee on a path to success. That’s why some boards hire parliamentarians to consult on how best to structure a charter which grants committee members a reasonable level of autonomy while still allowing for proper board oversight.
Structuring a Committee Charter
Many charters begin with a brief overview of the committee’s purpose. This may involve crafting a mission statement or statement of purpose. The goal is to describe the board’s intentions for creating the committee as well as how those intentions translate to the committee’s objectives.
Once the board has crafted a mission statement (or some similar outline of the committee’s primary objective), the next section of many charters is a description of how committee memberships are determined. This description commonly includes:
- The committee’s term limits,
- How committee members are appointed,
- How the committee’s chairperson is determined,
- The committee’s size limitations and requirements,
- Which committee members are granted voting privileges, and
- The number of board members required to serve on the committee.
If a board does not choose to address chairmanship in its membership section, it is often given a section of its own. This section commonly details whether the chairperson is determined by the board or by committee members themselves, term limits for chairmanship, whether a vice- or co-chair will be appointed, as well as how those vice- and co-chairs are appointed.
Almost all committee charters include a detailed list of the group’s roles and responsibilities. This can include information regarding the degree of autonomy with which the committee is allowed to operate; specifically the decisions they are allowed to make without further approval from the board. Many charters also add supplemental information regarding the internal governance practices of the committee itself. This may include:
- The committee’s reporting practices,
- Requirements for taking attendance,
- Details about when the committee meets,
- The frequency of meetings in a given year,
- How meeting minutes are recorded (and by whom),
- The length of time for which the committee will exist*,
- The designation of executive or administrative assistants,
- The level of access to sensitive information granted to assistants, and
- The minimum number of committee members required to be in attendance in order to constitute a quorum.
* Some committees exist solely to address a single (often larger) issue or topics/events which occur on a recurring basis. Therefore, some committees are dissolved once an issue has been addressed or meet infrequently as recurring topics/events arise.
Some boards of directors may choose to include all of the items mentioned thus far when creating a committee charter. Others may only include a few. Charters are crafted to meet the needs of the committees that abide by them. The extent to which a charter is able to meet a committee’s needs relies largely on how these structural elements are applied.
Applying the Charter Structure
Knowing what a board may choose to include in a committee charter is useful information, but that’s only half the battle. Directors can further their understanding of what makes a strong committee charter by reading examples from other organizations. Studying existing charters offers a glimpse of how each component discussed above can be applied to meet the needs of the organization. A number of example committee charters from organizations across multiple industries are included below:
Healthcare
- Marketing Committee Charter (Montefiore Nyack Hospital)
- Governance Committee Charter (American Cancer Society)
- Patient Advisory Committee Charter (Edward-Elmhurst Health)
- Executive Evaluation and Compensation Committee Charter (American Hospital Association)
Finance
- Audit Committee Charter (Community National Bank)
- Credit Committee Charter (Citizens Community Federal Bank)
- Operations and Technology Committee Charter (Morgan Stanley)
- Directors Compensation Committee Charter (Cortland Savings and Banking Company)
Education
- Audit Committee Charter (The State University of New York)
- Compliance Oversight Committee Charter (University of Richmond)
- Budget and Finance Committee Charter (University System of Maryland Foundation)
- Academic Affairs Committee Charter (University of West Florida)
Technology
- Audit Committee Charter (Seagate Technology)
- Nominating and Corporate Governance Committee Charter (Tableau Software, Inc.)
- Compensation Committee Charter (Paycom Software, Inc.)
- Audit Committee Charter (American Software, Inc.)
You can find more helpful tips and best practices for crafting a committee charter in the Directorpoint blog. To learn how Directorpoint’s powerful, user-friendly board management software, you can schedule a demo or contact us online. You can also call (888) 492-7020 to speak to a board technology specialist.