CHAPTER 14Board Committees
1. Introduction
The board of directors as a representative of shareholders is responsible for protecting the interests of shareholders by engaging in strategic decisions and overseeing the managerial function in managing, directing, and controlling the company’s affairs, activities, and performance. The oversight function of corporate governance is performed by the company’s board of directors and its designated committees. Boards of directors perform their advisory and oversight function through well-structured, planned, and assigned committees to take advantage of the expertise of all the directors. Board committee formations and assignments depend on the size of the company, its board, and assumed responsibilities. Committee members address relevant issues and make recommendations to the entire board for final approval. Board committees normally function independently from each other, and are provided with sufficient authority, resources, and assign responsibilities in assisting the entire board.
Boards of directors often delegate their oversight responsibilities to board committees. However, the entire board remains responsible for the oversight of these delegated functions. Listing standards of stock exchanges (e.g. NYSE, AMEX, and Nasdaq) require that listed companies establish at least three board committees: the audit committee, the compensation committee, and the nominating committee in the post–Sarbanes-Oxley Act (SOX) of 2002.1 These three ...
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