The decisions that fall between board committees

The risk committee has reviewed the exposure. The audit committee has discussed the controls. The remuneration committee has considered the incentives. Each has reported that its work is complete.

Yet the board still has to decide whether the business should proceed. Nobody has brought the separate conclusions together, and each committee assumes another has dealt with the uncomfortable part.

Committees help a board examine difficult subjects in depth. Their boundaries can also divide a single business decision into pieces that no longer make sense on their own.

Follow the issue across the boundaries

Imagine a company introducing demanding sales targets for a new product. Remuneration looks at rewards, risk at customer outcomes and audit at the quality of reported sales.

The important question runs through all three: could the incentives encourage behaviour that the controls cannot reliably detect? Separate papers may describe each element without answering that question.

Choose a few material issues and trace how they move between committees. Identify where findings are shared, where assumptions differ and who is expected to bring an unresolved point to the full board.

Name the lead without closing the conversation

A lead committee can coordinate the work, obtain contributions and ensure the board receives a combined recommendation. That responsibility should be explicit.

It does not make the subject exclusive to that committee. Others still need to examine the parts within their remit and challenge the conclusions that affect their work.

For a major issue, agree the practical arrangements early: the questions to be answered, the sequence of meetings and the point at which the board will decide. A last-minute exchange of minutes is a poor substitute for planning the discussion.

Show where the conclusions do not fit

Committee reports should make material differences visible. One committee may regard a proposal as commercially necessary while another doubts that the controls will be ready in time.

That is useful information for the board. It should not disappear inside a carefully negotiated paragraph that makes everyone appear to agree.

Ask each committee to distinguish what it has examined, what it has concluded and what remains outside its assessment. The board can then see whether it has enough evidence to decide, rather than mistake several completed reviews for a complete answer.

Return to the full board's responsibility

The board should periodically check whether the allocation of work still fits the business. New activities, acquisitions and changes in regulation can create responsibilities that older terms of reference never anticipated.

Where a company has few or no committees, the same principle applies to divisions between directors, advisers and management. Someone must connect the work and bring the decision to the right body.

A useful test is to take a recent difficult decision and ask who was responsible for the whole question. If the answer requires several people to explain why it belonged elsewhere, the board has found a gap worth closing.