Corporate Governance: Examining the Roles and Functions of Committees

This report provides an overview of the functions of key board committees within corporate governance, focusing on their influence on corporate accountability. It examines the roles of the Risk Committee in managing risk policies, the Audit Committee in ensuring financial statement qualit...Read More

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Corporate Governance
Risk committee: This committee has been considered as an independent committee of the board
of the directors that has its sole and exclusive functions accountability for the risk management
policies of the firm’s international operations and omission of the functions of the firm’s
international risk management framework (Tricker and Tricker, 2015). The primary functions of
the this committee comprise of assisting the board of directors in accomplishing its oversights
obligations in relation to the risk desire of the business entity and the risk management and
compliance guidelines and the governance framework that us providing support to it. Risk
appetite of the committee can be defined as the level and type of risk a business organization is
able and willing to assume in its exposure and in the business practices. The below mentioned
are some of the prime accountabilities of risk management committee that are also influencing
the board committee:
Assessment of the risk profile and key areas that are open to risk in particular is one of the prime
obligation executed by the risk committee. Recommending the board and adoption of risk
assessment and rating procedures.
Audit Committee: The core obligation or the function executed by this committee is to monitor
the relationship of the business entity with the external auditors for ensuring the quality of the
firm’s financial statements. The other main role of the audit committee includes making
recommendations for the appointment and reappointment of the external auditors, the pay or the
remuneration offered and their terms on which they are agreeing to work. And for executing a
smooth flow of operations the business entities are required to maintain the concerned
professionals and also the regulatory requirements with the governing authorities. Another
essential requirement that the audit committee members should have is relevant financial
proficiency and experience level (Companydirectors 2018). And this is because the audit
committee will be monitoring, scrutinizing and reporting to the board about the gravest
accounting policies that form the basis of the financial statements. The below mentioned are the
primary functions in which the committee is indulged:
Ensuring the veracity and competence of the organization’s financial reporting systems is one of
the primary obligations of the audit committee. Monitoring and evaluating the competence of
internal accounting system adopted by the business firms is another duty that can influence the
board. The audit plan is also reviewed an agreement over the same is also required to be taken by

Corporate Governance
the audit committee (Larcker and Tayan, 2015). Moreover, the internal audit committee is also
held responsible for managing the appointments, performance, and independence of the external
auditor.
Nomination committees: The nomination committees are held liable for the various functions
such as leading the process of board appointments after considering the requirements of the
business organization and also making recommendations to the board authorities (Bühr and
Seitz, 2015). Under these obligations, the executives and non-executives directors are held liable
for executing the operations. The nomination committee fails in attracting the attention of the
stakeholders as compared to the audit and remuneration committees. But nowadays a change has
been observed in this as the benefits of diversity are becoming more recognized over the board.
The outcome of the financial crisis armored the significance of oversight and thoroughness in the
boardroom (careers.accaglobal 2015). According to the guidelines and the principles, it has been
noted that the nomination committees should have a minimum count of three directors and
should have a majority of independent directors. For instance, the nomination committee may
also make the involvement of the company executive directors for attending and providing
further visions about the business. The involvement of the executive directors is made dependent
on the nature of the tasks and allotted to the committee. Recommendation for these directors is
also required to be made by an existing director. The below mentioned are some of the core
functions of the nomination committee that are held liable in influencing the accountability of the
board:
Assessing the requirements of the board and of the business corporation in terms of the
capabilities, skills, knowledge, and experience for directors, superior management authorities
and CEO and also making recommendations regarding the termination, retirement, and
appointment and rules and regulations followed in the organization are the basic functions of the
nomination committee (Bain and Band, 2016). Moreover, organizing various programs such as
induction, performance and development are also executed by this committee. Ensuring proper
succession planning is also one of the core operations that are carried out.
Remuneration committee: The prime role of remuneration committee is assisting and advising
the board of the organization the matters relating to the remuneration of the board members and
the senior managerial staff. This will motivate and retain the executives and also ensuring that

Corporate Governance
the business organization is able to attract the potential and best talent so as to maximize the
value of shareholder. The remuneration committee set the payoff levels for board of directors
and senior management staff should be set with reference to the benchmarks of the markets.
Reviewing and approving the managements remuneration, making recommendations to the
board on the firm’s policy and structure for all the directors and management staff and reviewing
and approving compensations arrangements that are related to the dismissal or removal of
directors for misconducting are some of the primary accountabilities that are required to be
adhered by the remuneration committee. The below mentioned are some of the other prime
obligations that are required to be fulfilled by the committee and that also influence the board
committees.
The prime concern of this committee is to review the practices and policies and making
recommendations to the board regarding the recruitment, remuneration, retirement, retention, and
terminations of the directors the senior authorities and the CEO. This committee should also
ensure that the business entity is making necessary disclosure to the market and the clients if
required about the remuneration (Spears and Lawrence, 2016). The remuneration team is also
held liable for making arrangements of superannuation. They are also required to take
responsibility for the adoption of the remuneration report.

Corporate Governance
References
Bain, N. and Band, D., 2016. Winning ways through corporate governance. Springer.
Bühr, D.L. and Seitz, C., 2015. From compliance programme to compliance management
systems: International convergence and standardization. Business Compliance, 4(2), pp.28-42.
careers.accaglobal, 2015, Sectors and specialism: NED and trustee advice, Assessed on 5th
February 2018, https://careers.accaglobal.com/careers-advice/sectors-and-specialisms/neds-and-
trustees-advice/what-are-board-committees-and-their-functions.html.
Companydirectors, 2018, Role of board committees, Assessed on 5th February 2018,
http://aicd.companydirectors.com.au/resources/all-sectors/roles-duties-and-responsibilities/role-
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Du Plessis, J.J., Hargovan, A. and Harris, J., 2018. Principles of contemporary corporate
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Spears, L.C. and Lawrence, M. eds., 2016. Practicing servant-leadership: Succeeding through
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Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.