A board of directors is accountable for strategic planning and decision-making of their company based on their goals, vision and principles. They are able to do this because they are individuals who are elected by shareholders to hold the power over the company’s assets.
But boards are busy, and it isn’t always feasible for them to meet and address all of the problems that a nonprofit faces on a regular basis, or in an emergency situation. This is why many boards decide to establish an executive committee. An executive committee consists of a group with strong leadership connections. They can be called together quickly to tackle the most pressing issues facing the board.
The executive committee is a consultative body to the board. They often meet more frequently, move fast and are in a position to draw upon research results to offer recommendations to the board. This allows the board to concentrate on matters of greater importance and delegate the smaller issues to the committee to address.
In addition the executive committee is often able to focus on workplace issues that must be addressed at a senior level, and also take the lead in developing the board by educating, mentoring and conducting annual self-evaluations for the board. This helps to streamline many tasks that the board must do and ensures everyone is on the same page with regards to coordination 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 submit regular meeting minutes, documentation, and a record on votes. This is because, in the common law jurisdictions, directors are deemed to be agents of the company, and thus are bound by their actions. This principle was reaffirmed by the House of Lords’ in the 1909 case Turquand v. Salmon and is widely accepted.