Committees allow focused oversight, and a charter is what makes the delegation effective and reviewable.
Contents. Purpose; composition and independence requirements; the appointment process; meeting frequency and quorum; authority delegated, stated precisely; responsibilities enumerated; the authority to retain advisers at the company’s expense; and reporting to the full board.
Authority versus responsibility. A committee with responsibility to oversee but no authority to act must return to the board, and the charter should say which decisions the committee may make.
Independence defined by reference to a standard, with an annual assessment documented.
Executive sessions with the relevant function — the auditor, the head of internal audit, the compliance officer — held regularly rather than only when there is a problem.
Annual review of the charter and a self-assessment of the committee’s performance.
Minutes of committee meetings, reflecting the matters considered and the questions asked, and a report to the full board at its next meeting.
Common committees. Audit, compensation, nominating and governance, and for particular circumstances a special or conflicts committee with its own charter and its own advisers.