Board committees are set up when the organisation is large and there are complex issues that require systematic discussions or when there are numerous managers are to be held by the board. There are two types of board committees are as follows:
Audit Committees: Such committee will review the reports, vouchers, documents with the managers and independent auditors, companies press releases etc. They will also make a recommendation to the board regarding any reappointment or removal of any statutory auditor etc.
Nomination Committee: They review and recommend revisions in the corporate governance practices of the company. The annual review of various programmes and policies of the organisation with regards to public policy and environmental sustainability. They also evaluate the composition of various committees.
Remuneration Committee: It is especially governed by Clause 49 of the listing agreement. This committee works around the remuneration packages of the senior executives, CEOs, Chairman. This package includes salary bonuses, share options, ESOPs, pension rights. The CEO is consulted for the remuneration of MD and senior executives. It also reviews whether the termination of the clause of contractual terms in an accordance with the laws or not.
Shareholder/Stakeholder Relationship Committee: It authenticates and approves the allotment of shares, nomination, transportation or transmission of shares of the company. They sub-divide or replace securities or shares of the company. They formulate procedures in compliance with statutory guidelines so that the requests and grievances of shareholders are promptly answered.
Compliance Committee: This committee ensures that the company is complying with the fiduciary and statutory responsibilities with regard to compliance and regulatory matters. It also monitors whether the company's policies are conforming with public policies.
Investor Relation Committee: It conducts a regular informal meeting with the top management to strategise the company's public relations and investor's relations. Identification of public policies, development of relations with global investors, disclosure of statutory and material information to the investors etc are the functions of this committee.
Investment Committee: It assists the board of directors in evaluating and revisiting the investment strategies, policies, performance evaluation annually, determines various investment restraints and approves the investment policy also of the company.
Risk Management Committee: It provides a governance mechanism and advises the board of directors about the future risk and current risk and developing strategies to combat them. It also performs an evaluation of various risk exposures and their tolerance. It approves the limits of trading.
Adhoc Committee: (temporary in nature) Taskforce committee, restructuring committee, merger and acquisition takeover committee, budget committee, These are as follows
- Taskforce Committees: They are found for a specific activity or task, i.e. is to be undertaken to find a solution to a given problem where the expertise of various people is needed. It requires a focused approach.
- Restructuring Committees: Often companies restructure their operations to achieve greater operating efficiencies. This committee takes decisions with regard to divestment, consolidation of various business and production units. Thus, restructuring committees are formed to take decisions about restructuring.
- Mergers and Acquisition and Takeover Committees: When the company plans to take over or merge another firm then these committees are formulated. They assist the director in designing strategy and issuing guidelines with regard to M & A. They also provide consultation on advantages and disadvantages in deals that are considered for takeovers and mergers.
- Budget Committees: This committee proposes the budget requirement in each financial year to the board of directors. Generally, the members are from the finance department who evaluate the different requirements on the basis of ongoing projects, salary structure of employees, incomes and expenditures and required allocation of to each functional division.