A board of directors is responsible of strategic planning and making decisions for their company that are based on their objectives and values, as well as their vision. They are able to do so because they are an aggregation of individuals, who are elected by the shareholders to hold control over the company and its assets.
Boards are extremely busy and don’t have the time to discuss all the important issues facing a non-profit especially during an emergency. This is the reason why many boards decide to establish an executive committee. An executive committee is comprised of a group of people with strong leadership connections that can be assembled quickly to address critical issues affecting the board.
The executive committee is a consultative body to the board. They usually meet more frequently and move quickly. They are also capable of utilizing research results and make recommendations to the board. This allows the board’s attention to be on higher-level issues and delegate issues of lesser importance to the committee.
In addition, the executive committee will often deal with workplace issues that have to be addressed at the highest level, and also take the lead in developing board members by educating, mentoring and conducting annual self-evaluations for the board. This allows for streamlined activities the board needs to accomplish and ensures everyone is on the same page when it comes to the alignment and decision-making process.
It is vital that both the executive committee and the board of directors are aware that they are ultimately responsible to the board. They will be required to provide regular meeting minutes, documentation and a report on votes. This is because, in common law areas, directors are thought to be agents of the company and thus are bound by their acts. This principle was reiterated by the House of Lords’ in the 1909 case Turquand v. Salmon, and is widely accepted.