To perform their duties effectively, boards usually split into committees that focus on different issues. A committee's charter, if it has one, sets down what the committees' duties are and how they should be carried out. Boards can also establish sub-committees that focus on different details of a committee's responsibility.
Nominating/corporate governance committees are responsible for naming candidates for board membership and overseeing the board's adherence to good corporate governance practices. According to new rules, a listed company must disclose several things about its nomination processes, including whether it has a nominating committee or why not, its charter or why it lacks one, how it identifies and evaluates candidates, and what the minimum qualifications are for candidates. The board must also disclose whether the nominating committee is made up of independent directors.
Audit committees supervise the company's process for auditing its financial reports. According to new regulations, listed companies must have audit committees composed of independent directors, who are responsible for hiring and firing auditors and addressing complaints about financial reporting. Listed companies must also disclose whether the audit committee includes a financial expert — someone with the knowledge and expertise to understand audit procedures.
Compensation committees set salary and performance bonuses for the CEO and other executives. Both the
NYSE
and the
NASDAQ
rules require that this committee be composed of independent directors, although the NASDAQ does allow limited exceptions.
Safety for
whistleblowers
The Sarbanes-Oxley Act of 2002 requires audit committees to establish a procedure for receiving complaints about accounting or auditing at the company. And the law prohibits publicly traded companies from retaliating against employees who report fraud or cooperate with federal fraud investigations.
Nominating/corporate governance committees are responsible for naming candidates for board membership and overseeing the board's adherence to good corporate governance practices. According to new rules, a listed company must disclose several things about its nomination processes, including whether it has a nominating committee or why not, its charter or why it lacks one, how it identifies and evaluates candidates, and what the minimum qualifications are for candidates. The board must also disclose whether the nominating committee is made up of independent directors.
