Compare and Contrast: Perspectives on Board Committees

Abstract

The establishment of board sub-committees has been strongly recommended as a suitable mechanism for improving corporate governance, by delegating specific tasks from the main board to a smaller group and harnessing the contribution of non-executive directors. In the UK, the Cadbury committee proposals focused on audit committees and the Greenbury study group advocated remuneration committees. Over the last decade, most large public companies have set up such committees, but their impact on governance standards has not been widely explored. This paper identifies significant differences in the orientation and operation of these committees. It also draws on interview data collected from participants in audit and remuneration committees to argue that these differences may lead to unacknowledged pressures on non-executive directors who form the membership of both committees. Given the current focus on the role of non-executive directors, the impact of such pressure is of particular importance.

Keywords: Audit committee, remuneration committee, non-executive directors