Executive committee: Responsibilities, challenges, tools to improve effectiveness

Whenever a large group gets organized — officially, it’s typically done by the dream team, which goes by many names including the Board of Governors, Overseers, Directors, or Trustees.

They then appoint, hire, or dispense with the selection of the numerous operating offices of their organization such as the treasurer, vice president, president, and other officers. The board of trustees, which may be comprised of over 18 members, subsequently organizes into various types of board committees.

Each of these subgroups specializes in different areas like operations, acquisitions, strategic planning, finance, sustainability leadership, insurance, etc. Among these subcommittees is the executive committee.

The executive committee’s purpose has evolved from mere decision-making and managing day-to-day operations to responsibilities like risk management and strategic oversight. Being so important to the organization’s overall success, it’s crucial to ensure it functions properly and consists of individuals with diverse backgrounds and expertise.

The latter, by the way, should be addressed proactively, as gender imbalance is still a major issue —  70% of executive committee members are male today. 

How to address these challenges, how to improve executive committee effectiveness, and what tools to use for that purpose is described in the article.

DOWNLOAD PDF

What is an executive committee?

The executive committee of the board is a group within the board of directors responsible for making decisions on behalf of the full board and shaping the organization’s strategic direction.

The executive board committee is composed of members who occupy the senior-most positions in the organization. They include the secretary, treasurer, chief officers, vice president, and president.

It’s a small group of directors who work in the interest of and are limited by the powers granted to them by the board of directors. Members of the executive committee typically have leadership ties, can convene on short notice to address urgent business, and report to the board of overseers.

In an ideal world, the board of trustees is responsible for making decisions and planning according to the values, vision, and mission of the organization. However, this is far from reality because it usually isn’t practical for the board, particularly large boards, to convene to take action.

And that’s where the executive committee saves the day and serves as a steering committee.

It prioritizes emerging issues for the board, stipulates the agenda for board meetings, and may act on behalf of the board in times of emergency when members of the board aren’t readily available.

Aside from the organization guidance, the function of the executive committee includes providing advice on everything from policy, risk management, strategy, and investments among other areas.

What are the key executive committee positions?

Let’s explore the executive committee structure and see who it usually consists of:

1. Chairperson. As a rule, it’s the board chair who also chairs executive committee meetings. In some cases, this person appoints other committee chairs, but the entire board can do this, too. The executive chairman also acts as a board spokesperson, ensures alignment with the organization’s mission and strategic goals, and may be involved in recruiting the CEO.
2. Vice-chairperson. The vice chair supports the chairperson, participates in decision-making processes, contributes to strategic discussions, and ensures the smooth functioning of the executive committee. When the chairperson isn’t available, the vice chair assumes leadership responsibilities, including conducting meetings and representing the committee.
3. Treasurer. This person is responsible for overseeing the company’s finances, preparing the annual budget (along with the CEO), providing financial reports, and advising the executive committee on investment strategies, risk management, and financial sustainability.
4. Secretary. This individual is responsible for recording minutes during meetings, handling official correspondence, maintaining records, and managing the distribution of documents to committee members. Some executives also expect a secretary to participate in board governance by facilitating communication between the committee and other board members.

This is a basic structure and the composition of executive committees can vary. For example, the executive committee of Volkswagen includes a chair, a deputy chair, and seven other committee chairs. The executive committee of Interpol has 13 members comprising the president of the organization, three vice presidents, and nine delegates.

Executive committee vs board of directors

Now let’s discuss the differences between the executive committee and the board of directors. 

Let’s consider a real-life example. In LVMH, a luxury goods conglomerate, the board of directors focuses on overarching company strategies and safeguarding social interests, while the executive committee translates these strategies into operational objectives, ensuring adaptability to the business environment and overseeing executive responsibilities and delegations.

What is the role of the executive committee?

The executive committee roles and responsibilities vary depending on the needs of each organization and are typically stipulated in the company’s bylaws. Here are some of the committee’s primary duties and responsibilities:

• Strategic planning. The executive committee participates in the development and review of the organization’s strategic plan, making sure short-term and long-term goals are aligned with the overall mission and vision.
• Financial oversight. It monitors and provides oversight of the organization’s financial health, and reviews and approves financial reports and budgets, ensuring adherence to financial policies.
• Organizational oversight. Executive committee responsibilities also include the supervision of the implementation of board policies, adherence to security guidelines, quality management, human resources practices, and regulatory compliance. This ensures the board’s commitment to operate following established procedures and policies.
• Liaison between the board and CEO. The executive committee acts as a bridge between the board and the CEO. More precisely, It ensures that the CEO is well-informed about the ideas, proposals, and concerns board members present. Similarly, it keeps the board updated about the CEO’s initiatives and performance.
• Advisory responsibilities. One of the core executive committee roles is to serve in an advisory capacity to support the decision-making process of the board of directors. They meet more often than the board, move fast, and make recommendations based on research results.
• Workplace issues. In addition to its advisory capacity to the board, the executive committee also caters to workplace important issues that require oversight at the senior-most level. Once workplace concerns have been raised, the committee decides whether to handle or move these issues up the chain to the board.
• Ad-hoc committee management. Representatives of the executive committees may be appointed to take on a supervisory responsibility in ad-hoc committees created to spearhead special projects. In this capacity, their main job is to make sure the objectives of the ad-hoc committee are met and serve as an intermediary between the committees’ leader and the board of governors.
• Policy development. Last but not least, the executive committee may be appointed to oversee the development of policies spanning a variety of areas, from human resources to ethics to environment to security to regulatory requirements, etc.

Aside from these duties, the executive committee may be called upon to create and implement strategy, budget, procedures, and operational plans of the organization. In addition to fulfilling its objectives, the executive committee has to act while balancing shareholders’ interests, maintaining integrity, and planning for the future of the organization.

Executive committee for nonprofit organizations

The basic concept of an executive board is similar for both for-profit and nonprofit organizations. However, there can be some differences in focus, responsibilities, and decision-making processes. Let’s explore these differences.

When should a board establish an executive committee?

The decision to establish an executive committee is influenced by several factors. Let’s explore the most critical ones:

1. When a board is large and can’t gather for a meeting quickly to address urgent matters. A smaller executive committee, on the other hand, can do this faster.
2. When the organization’s members are geographically scattered. In this case, there’s a need to overcome logistical challenges and ensure prompt issue resolution.
3. When an organization deals with numerous repetitive matters, such as routine legal or financial procedures. Executive committee members can handle these matters efficiently without involving the entire board.
4. When the organization frequently encounters controversial ideas. The executive committee, in this case, serves as a testing ground. It can discuss these ideas before bringing them to the full board, ensuring a thoughtful approach.

It’s important to note that executive committees aren’t a one-size-fits-all solution and aren’t meant to replace the traditional board of directors. They just work to improve the board’s responsiveness, particularly in situations where involving the entire board isn’t needed. For smaller boards, for example, traditional structure is often sufficient and doesn’t require the creation of an executive committee.

Common challenges faced by executive committees

Let’s explore the most common challenges executive committees have to deal with:

• Over-concentration of power. There’s a risk of the executive committee becoming a “board within a board”, as highlighted by Ng Siew Quan from PwC Singapore. Regular and dominant decision-making within the executive committee can make the broader board take a secondary role and lose a sense of responsibility.
• Shift towards micro-management. Ng Siew Quan also underlines that there is a risk that the Exco becomes too executive, moving from being a governing body to a body that effectively micro-manages the business.
• Lack of diversity. According to the research, 76% of executive committee members are caucasian, 70% are male, 54% members are white men, and 21% are white women. This lack of diversity in backgrounds and perspectives can hinder the ability to generate innovative solutions and make the right decisions.
• Communication challenges. Executive meetings often can’t be planned in advance, due to their their spontaneous and urgent nature. This unpredictability makes it inconvenient to arrange meetings, coordinate schedules, and share necessary documents promptly. This negatively influences decision-making and overall efficiency.

Tip: Use calendar management for executive assistants to simplify scheduling, allocate time and resources wisely, and collaborate efficiently with other parties.

How board portals help optimize executive committee operations

A board portal is a software solution designed to facilitate executive communications, collaboration, and document management. Here’s what it offers:

1. Efficient document management. Store, share, and manage board-related documents securely. Upload entire folders in bulk, search for documents using advanced filters, and leave comments and annotations.
2. Agenda-builder. Create agendas in a matter of minutes using drag-and-drop and autofill features.
3. Enhanced virtual meetings. Create and schedule online meetings, access agendas, board materials, and minutes, and stay on track regarding upcoming gatherings. This unified approach fosters diligent preparation, leading to more productive meetings. 
4. Real-time note-taking. Document key insights, decisions, and discussions during executive committee meetings directly within the board portal. 
5. Voting. Cast votes, comment, and approve decisions right within the board portal. Leverage functionality like voting on behalf of others and voting in unanimous decisions.
6. Meeting minutes. Create, share, and approve minutes quickly. Automatically transfer information from meeting minutes.
7. Enagment and task tracking. Track the preparation and reading progress. Assign tasks and send reminders. Our article Questions to ask senior executives may help you to gain insights into what to ask to know about employee engagement and performance. 
8. Mobile accessibility. Have access to all meeting materials, agendas, and board-related documents 24/7 via your mobile device. 

Explore the Ideals Board solution to enhance your board management processes, streamline communication, and optimize collaboration for more effective decision-making.

Key takeaways

Let’s summarize:

• The key function of the executive committee is to facilitate decision-making between board meetings or in urgent and crisis circumstances.
• Key executive committee positions include a chairperson, a vice-chairperson, a secretary, and a treasurer.
• Key executive committee responsibilities include strategic planning, financial oversight, organizational oversight, liaison between board and CEO, advisory responsibilities, ad-hoc committee management, and policy development.
• A board portal streamlines executive committee operations by providing efficient document management, agenda creation, enhanced virtual meetings, real-time note-taking, voting capabilities, engagement and task tracking, and mobile accessibility.

To keep up with other businesses and industry trends, it’s crucial for an executive committee to stay agile and responsive. For that, continuous learning, adaptability, and innovation are required.