Let’s talk: governance – April 2014
Beyond key committees
Boards create committees to support oversight responsibilities
A company’s governance practices — including committee organization — should be developed taking into account the specific circumstances at the company and in its industry.
Nearly every S&P 500 company board has three key committees — audit, compensation and nominating — to carry out critical board functions. Many boards also have created additional standing committees to assist with oversight responsibilities. Beyond specific regulatory and exchange-listing requirements associated with key committees, boards often create committees and delegate responsibilities as appropriate, based on company-specific circumstances.
This research provides insights on what additional committees we see boards maintaining and the responsibilities assigned to these committees.
Beyond audit, compensation and nomination committees, nearly three-quarters of S&P 500 companies have at least one additional committee. The average number of additional committees is 1.3.
- The most common committees based on function are finance (38%) and executive (37%).
- More than 20% of finance committees are found in the consumer discretionary and financial services sectors.
- Around 20% of executive committees are in these sectors as well. Once common, these committees are in decline. More than 60% of S&P 500 companies had executive committees in 1998 compared with less than 40% today.
- Just over 10% of S&P 500 companies have a separate compliance committee. One-third of these committees are in the health care industry, and nearly one-quarter are in the energy sector.
- Only 8% of S&P 500 companies have a separate risk committee – and more than three-quarters of these companies are in financial services.
- Some boards have created committees to oversee emerging issues:
- 7% of S&P 500 boards have a sustainability committee. Companies in the materials, financial and consumer staples sectors are most likely to have a sustainability committee.
- 4% have a technology committee, and one-third of these are financial services companies.
- Sectors most likely to have additional committees include utilities (averaging 2.5 additional committees per board), financial institutions (1.7), health care (1.5) and materials (1.4).
- The information technology sector averages the lowest number of additional committees – fewer than one per company (0.7).
Most common additional board committees at S&P 500 companies
|Companies with this committee||Committee function and common responsibilities||Top three sectors with this committee (% of industry)|