Sir Vernon Ellis shares his Thoughts on the Importance of Board Sub-Committees

Sir Vernon Ellis shares his Thoughts on the Importance of Board Sub-Committees

Early on in my experience as a cultural sector trustee I saw many boards fall into the temptation of not having board committees. This was on the grounds that the management team (executive) and board were both small and that it was good for everyone to have an overview of everything.

This is a mistake. Board committees are important, but often undercooked. I now believe that every board, however small the organisation, needs at the very least the three committees I outline below. These are Board Committees, with formal Terms of References approved by the Board and their minutes discussed at full board meetings

They provide focus, the ability to dig deeper than is possible at a full board meeting, and the opportunity to have committee chairs and trustees with specialist, relevant expertise and experience, who can hold the organisation to account and ensure strategic plans and timetables are adhered to.

Particularly importantly for RIAC, they also give young professionals, new to cultural trusteeship, the platform to both learn and contribute to best practice. It is also possible to second other people with specialist expertise to join committees. This can be useful in itself but can also be a springboard for the full board.

I’ve also suggested other committees that some but not all organisations might find useful, which might sit alongside special temporary advisory committees for difficult issues if they arise. What I have also found useful is an annual Away-Day on Strategy for the whole board.

I should stress that what follows is what I have found useful. It is not a board manual and there can be many valid variations. But I do feel strongly that there should be formal board committees.

Finance, Audit and Risk Committee (FARC)
The FARC reviews finances at a high level, with a view to risks and longer-term outlook.

Its first concern is on financial process – is financial reporting of a quality and timeliness that allows the executive to manage and the board to monitor risk?

This committee should have a proper understanding of cashflow forecasts (too often overlooked) and balance sheet (including any property assets), should review budgets in detail before their submission to the board, and have oversight of annual reporting and audits (or equivalent for smaller organisations). It should also meet with the auditors and discuss their review points on process and controls.

On risks, FARC must regularly check on the risks inherent in budgets and in the forecast cash flow and flag to the board any concerns about financial exposures. FARC also should regularly review and update the Risk Register, too often focused on format and not substance.

For performing arts organisations, someone on the FARC should make it their role to understand the detail and complexity of theatre or orchestral tax relief.

As a Chair of trustees, I do not sit on the FARC, preferring a trustee who is an accountant or with a similar background in finance to chair its quarterly meetings. This is partly a time issue, but also preserves the ability of the committee to challenge the executive and raise issues to the Board.

(It also helps avoid it being turned into what used to be called a Finance and General Purposes committee where the members have no interest in replicating their whole meeting for the full board, meaning that other board members then feel they are second class citizens excluded from important discussions.)

A final point is on the role of “Treasurer”. Typically, in many small organisations this is a trustee, usually an accountant, usually unpaid, who has a direct role in preparing the accounts. It can work but I am rather against it. It can hold back the professionalisation of the accounting function and usually means there is not independent board oversight of finance and risk.

Remuneration Committee (RemCo)
This sets the salary of the Chief Executive (or the Artistic Director / Chief Executive joint leaders). In some organisations the board has to approve RemCo’s salary proposal, in others it does not. Typically, RemCo also reviews but does not set other senior management salaries and has oversight of salary bands and adjustments for inflation. It should ensure that proper processes for performance reviews are adhered to.

It is good governance for someone other than the Board Chair to chair this committee, as the Board Chair has to conduct the performance appraisal of the Chief Executive and bring their proposed salary to RemCo.

RemCo typically meets twice a year – one meeting to review proposed salary bands, inflation adjustments and revisions to policy, and one to review salary proposals.

Nominations Committee (NomCo)
The purpose of this committee is simply to ensure that the Board is appropriately balanced, refreshed and representative, and should be chaired by the Chair of trustees – this balance is their responsibility. It should monitor the make-up of the board against a matrix of needs and backgrounds, oversee searches for new trustees, with two or more committee members meeting trustee candidates before any appointments are made (or any promises of appointments are made by the Chair!).

There should be Board terms (typically four years with an option to review once, exceptionally, twice) and the Chair should lead frank conversations at the time of renewal to review the board member’s contribution and their enjoyment of the role. Board evaluation, which can be by simple questionnaire, should be conducted regularly and should take place every two or three years.

NomCo only meets once or twice a year and can share the same membership as RemCo (especially for small boards).

Other Committees
Depending on the organisation, there may also be a Property Committee where the portfolio is extensive, or a Health and Safety and or Safeguarding group where the organisation has a particular exposure to risk in those areas. These maybe formal or just advisory.

Mention Development (Fundraising) Committees to any Director of Development and they will turn up their noses. Their experience, and mine, is that such committees’ interest is in talking about everything but Development. But given the right membership, a focused campaign and a hard driving chair, they can be useful.

Artistic Committees are effective when they are a useful bridge between ambitious artistic plans and financial reality, with a focus on reviewing the balance of programming against building audiences, income targets and long-term financial exposure. However, be warned – everyone wants to second-guess artistic planning!

Learning and Participation is rightly an increasing focus for many organisations and a committee in this area should review what is happening so the board can take an informed view of how this activity contributes to the organisation’s overall strategy and offering.

Other committees could cover marketing and audience development, digital outreach, or new earned income opportunities where trustees with relevant skills and experiences can understand and comment on planning and activity.

Sir Vernon Ellis is a member of RIAC’s ‘Brain Trust’ of mentors. Previously International Chairman at Accenture, he is a former Chair of the British Council (2010-16) and has had an extensive involvement in the arts and philanthropy. Vernon has chaired the boards of English National Opera, National Opera Studio, the Leeds International Piano Competition and Britten Pears Arts. He is Chair of Live Music Now, Britten Pears Foundation, StopMS, and New Philanthropy for Arts & Culture.