Startup Boards, 2nd Edition

Chapter 20Committees

Early in a company's life, there are rarely separate board committees. However, as the company, and the board, grow, two committees generally are created: Compensation and Audit. As companies get closer to an initial public offering (IPO), a third committee—Nominating—is created.

Each committee generally has at least two board members on it, with one acting as the committee's chair. Generally, the committees make recommendations to the full board instead of being responsible for the actual decisions. The committee charter, which your outside counsel can easily draft, defines the scope of authority for each committee. Depending on your charter, the CEO will either sit on all committees directly or ex-officio, which means they will attend all committee meetings without actually having a committee vote.

While the committees don't have to meet before the board meeting, having a regular tempo around the committee meetings as your company grows creates formality and ensures regular board-level conversations around compensation and audit issues.

Committee Meeting Formalities

Ideally, each committee meeting is up to an hour and happens the day before or the same day as the board meeting. Then, at the beginning of the board meeting, each committee chair gets a short session of under ten minutes to do a read-out from the committee meeting along with any recommendations for the board to consider.

As with all meetings, each committee meeting should have formal minutes. ...