Board committees evolve to address new challenges

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Oversight responsibilities shouldered by boards are increasing in scope and complexity. Much of the pressure is a result of heightened regulatory requirements, shifting investor expectations and transformative global changes.

To better address evolving responsibilities, boards are increasingly creating additional committees — beyond the three key committees that oversee the critical board responsibilities of audit and financial reporting, executive compensation, and director nominations and board succession planning. The need for additional committees reflects changing board priorities and pressures, boardroom needs and company circumstances.

For example, responsibilities such as strategy or risk may shift from one committee to another, be distributed among multiple committees or addressed by the full board.

The EY Center for Board Matters reviewed board structure at S&P 500 companies between 2013 and 2016 through the lens of the committee’s primary function and uncovered five observations about how S&P 500 boards are structuring committees to address oversight challenges:

What about smaller company board structure?

  • A review of S&P SmallCap 600 board committee structure reveals the following:
  • Today, 46% of smaller companies have at least one additional board committee.
  • Top five additional committees at smaller companies are executive (18%), risk (7%), finance (7%), strategy (6%) and compliance (5%).
  • Technology-focused committees are relatively uncommon (2%).
  • Risk committees saw the most year-on-year growth (3 percentage points); other committees held steady.
  • On a sector basis, utilities companies are the highest user of additional committees (82%), followed by financial services at a distant second (68%).