What is an executive committee? Everything you need to know.
In organizations with boards of directors, there will most likely also be executive committees. While some people assume the two are the same, the executive committee is a subgroup of the board of directors and helps assist the board with day-to-day operations while implementing strategies across the business.
From the role of an executive committee to a rundown of the main committee positions, we have covered all need-to-know information in the guide below.
What is an executive committee?
An executive committee is a group within an organization that is made up of leaders within the business such as executives, directors, and the CEO. The executive committee makes key decisions within the organization, shaping policies and executing company-wide strategies, often on behalf of the board of directors.
Board of directors vs. executive committee: what’s the difference?
The board of directors consists of an elected group of individuals, some of whom work for the organization at hand and others who may not. Directors are often located in different places geographically, meaning they do not get together frequently, instead attending pre-planned gatherings several times a year.
The board of directors represents the best interests of shareholders and exists to ensure the business’ overall success. Therefore, the board of directors is the highest-decision-making committee in an organization and will decide upon long-term company goals, strategies, and policies.
On the other hand, the role of the executive committee is quite different. As a subdivision of the board of directors, the committee must be more detail-oriented and focused. The executive committee role requires members to implement board strategies and turn them into decisive action points through the management of daily business operations.
Since the executive committee is usually smaller and made up of senior members of a business, the committee can get together more frequently than the board of directors. Therefore, in an emergency, when there are urgent matters to be discussed, the executive committee must meet promptly and act on behalf of the board’s best interests.
A good way to remember the difference between the two groups is to understand that the board of directors handles the ‘big picture’, while the executive committee deals with day-to-day operations and decides on priorities based upon the board of directors’ recommendations.
What is the role of the executive committee?
The role of an executive committee is similar across different types of businesses. Executive committees are usually central decision makers, deciding upon how to best implement board policies across organizations. The main executive committee responsibilities include:
Planning: The executive committee makes business and financial plans based on several factors including board decisions, current trends, and risk factors.
Policy implementation: When policies are signed off by the board of directors, it is the executive committee’s responsibility to ensure that these are implemented across the organization.
Performance reviews: The executive committee reviews the overall business performance, financial reports, and KPIs to create goals for the next financial year.
Governance: To keep in line with governance and compliance regulations, the executive committee will develop procedures to ensure the business complies with legal, regulatory, and ethical requirements.
Advising the board: Executive committees will often filter which business issues should be sent to the board for review and advise the board on the most pressing matters.
Training the board: The executive committee will organize board training and carry out regular assessments to ensure the board is functioning as it should.
Shortlist board members: If board members quit or retire, new board members must be voted in. The executive committee can shortlist candidates and recommend these to the board of directors.
Executive committee positions explained
There are usually around three to seven members in an executive committee, consisting of high company executives, including the CEO. In general, there are four roles:
Chairperson: The chairperson will be elected by the committee and will guide the committee to ensure that the board’s policies are met.
Vice-chairperson: If the chairperson cannot fulfill their duties, the vice-chairperson will step in during their absence.
Secretary: The secretary is in charge of taking meeting minutes, creating a meeting calendar, and ensuring agendas are accurate before meetings.
Treasurer: The treasurer manages finances, and presents financial report findings to the board, while also developing financial strategies for the business.
How can executive committees work more effectively?
The role of an executive committee is an important one; therefore, it is essential that the committee can work together as effectively as possible to further business success.
Set roles and responsibilities: To best support the board of directors, the executive committee needs to ensure all committee members understand their responsibilities from the outset, both as individuals and as a group.
Understand business goals: By fully understanding the board of directors' business goals, the executive committee can work together to ensure the correct strategies are developed.
Improve collaboration: Effective collaboration ensures the executive committee members are all up to date on board developments and can work together more effectively to achieve objectives. A great way to improve collaboration between executive committee members is to use a board management tool such as BoardWorks™.
Upgrade your executive committee operations with BoardWorks™
The executive committee is an essential piece of your business framework. Without proper organization and alignment with the board, your executive committee won’t be as effective in its ability to support the board of directors and their business goals.
With BoardWorks, boards and executive committees can communicate virtually, share and review important documents, and sign off new policies in a secure place. If you’re interested in learning more about how BoardWorks can help your organization, get in touch with our team today.