Corporate Governance: Board Committees

The Indian Companies Act: VI of 1882)The provision of section 292 of the Companies Act provides for delegation of powers by the BoD to the Committee of Directors of the powers regarding (a) borrowing money for the company otherwise than for debentures, (b) investing the funds of the company, and (c) making loans by the company.
In practice, however, Boards do appoint –specific committees for in-depth exploration of certain matters e.g., diversification project, shutting down a plant. These committees work for a specified period and submit their views to the full board. There are standing committees, which meet in the interval between the board meetings, and are expected to devote greater attention to details in important matters arising from those functions. It is the outside directors who officially comprise such committees. Some important committees usually set up by the board, comprising outside directors are as follows:


Audit committee: It consists of independent directors who report to the board. Usually the committee acts as a link between the board and the external auditors. They look into the issues raised by the external auditors in greater details. Some of the functions of the audit committee are:
  • To review the interim and final accounts in Toto.
  • To solve any problem they come across while completing the audit with due consultation with the independent auditor.
  • To make recommendations regarding the audit fees, selection and replacement of the auditors.
Remuneration committee: This committee reviews the remuneration packages of the executive directors and other top-level managers. It consists of independent directors and drafts the remuneration policy of the company, which checks the unreasonable increase in the executive compensations.

Nomination Committee: Nomination committee is usually set up to select new non-executive directors. The chairman of the board heads the committee.

1 Comment on "Corporate Governance: Board Committees"

  1. This was written by me too. Do remove.

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