Boards and committees; what are the differences?
There are important differences between boards and committees:
· A board acts as a team; the key aim is to maximise performance. A good board will be willing to upset certain stakeholders if the long-term value created by a course of action is greater than that of other potential courses. A board has a statutory duty to further only the interests of the company, although many directors consider this to be represented by the interests of the shareholders as a whole. Board members have no such duty to further the interests of any other stakeholder, although many directors consider stakeholder interests as they impact the interests of the company over the long term. Where a board member has been nominated by a shareholder or stakeholder, that board member still owes his or her duty to the company and never to their nominator(s). When the interests of a shareholder conflict with those of other shareholders, the directors must do their best to impartially assess the best course of action for the company as a whole and not for any one group. Another important difference is that board members carry a personal liability for the actions of the organisation that the board governs. This liability extends beyond the decisions made by the board members in board meetings to myriad other events including, but not limited to, workplace health and safety, trade practices, solvency, bullying and harassment.
· A committee is a decision-making body that looks and, to some extent acts, like a board but it is made up of representatives. The key aim of a committee is to ensure that no outcomes will be unacceptable for any one of the stakeholder groups represented. This is very different from the aim of a board, which is to maximise performance. A committee is more focused on minimising the chance of an unacceptable outcome. For the public sector the use of committees made up of representative members is crucial for good governance in difficult areas where free markets would not provide good governance outcomes. Committee members are usually held to account by their nominators but rarely have responsibility for actions outside their sphere of direct control.
Julie Garland McLellan is a consultant who works with boards and directors to give them the practical skills they need to build better businesses. She is famous for her practical and pragmatic approach to the real problems that face boards and directors and for her ability to bring sanity and solutions to even the most vexed boardroom.
She has first-hand experience on 18 boards across three continents — including listed, private, government, and not-for-profit boards — and has helped boards to lead successful organisations for over 22 years. Julie has written and facilitated director education for leading governance institutions, including the Australian Institute of Company Directors, The Governance Institute of Australia, The National Association of Corporate Directors (USA), The Taiwan Corporate Governance Association, etc.
Julie is the author of six books for directors and is publisher of The Director’s Dilemma newsletter.