A board of directors is responsible for the strategic planning and decision-making processes for their organization according to their vision, goals and values. They are able do this since they are a group of people elected by shareholders who be the ultimate authority over the company’s assets.
Boards are very busy and can’t always meet to discuss all the crucial problems that a nonprofit faces especially in the event of an emergency. This is one reason why boards opt to form an executive committee. An executive committee is a group of individuals who have close connections to leadership that can come together in a short time to discuss important issues that affect the board.
The executive committee acts as an advisory body to the full board. They meet more often, are more efficient and can make use of research results to provide board recommendations. This enables the board to concentrate on more important issues and delegate smaller-scale issues for the committee to address.
The executive committee will often assume the role of being a leader in the development of the board, providing training, mentoring, and conducting self-evaluations annually. This assists in streamlining the many activities the board needs to do and ensures that everyone is on the same page with regards to coordination and decision-making.
It is crucial that the executive committee, as well as the board of directors, understands that they are ultimately accountable to the board. They will be required to provide regular minutes of meetings, documentation and a written record of votes. This is because, in the common law jurisdictions, directors are believed to as agents of the business and have a binding effect on the company through their actions. This is a principle that was further affirmed by the House of Lords in the 1909 case Turquand’s Salmon and is widely accepted.