Corporate governance needs an assembly line: Why board committees are key to better oversight and strategy

Boards of directors, their role, meetings, fiduciary duties, and overall function, are somewhat sui generis in the world of business. Meetings are an essential (if often frustrating) part of any organisational structure. But even big, consequential business meetings weighing budgets and strategic matters don’t have the ultimate legal role of a board of directors' decision. Executives typically focus on their own specific piece of the decision-making process. Shaping a timeline on a new marketing project, for example, is just one piece of an overall marketing, and then strategic, plan.

A board is expected to not just examine the budget of that ad buy but also weigh long-term financial plans, plus their ultimate fiduciary duty to investors. Today’s boards are expected to know both the micro aspects of corporate operations while simultaneously considering grand, 30,000-foot matters of compliance, strategy, social issues, and company culture. This duality is not just challenging; it is structurally unnatural. Board members, mostly part-time professionals from diverse industries, are tasked with making decisions that require both deep operational insight and high-level strategic foresight. This combination of micro and macro governance is a difficult balance to strike, and it may result in oversight that is neither sufficiently detailed nor effectively strategic.

Don’t overlook how awkward this micro/macro portfolio mashup is for the part-time amateurs in the boardroom. Worse, it builds in lower-quality board oversight. As the complexity of governance has grown, so too has the expectation that boards will engage in more specialised and in-depth scrutiny of corporate operations. The challenge, however, is that expecting a full board to execute both strategic and operational oversight in the same sitting is neither practical nor effective.

One solution that has gained traction is the increasing reliance on board committees. Of necessity, committees are now a valuable tool in breaking down board work into manageable chunks. But they can also deliver more focus, better balance, and higher-quality oversight.

This is not a new approach. Consider assembly line production. In the early days of automobiles, workers would painstakingly assemble each vehicle piece by piece from the ground up. Aside from inefficiency, this also reduced quality – parts had to be cobbled together to fit. With standardisation, assembly lines became possible. Every part would fit with every other part, allowing quality components to be built in mass, then flowing together to final assembly.

A robust, professional board committee system becomes a model for governance mass production. Each committee has the skills, tools, processes, and support to monitor and make good recommendations on finance, compensation, risk, and other components of the overall board mandate. Then, these separate elements come together at the full board. The quality of each committee’s report should be so high that the board has no need to re-do their work. This allows the board to focus on what truly matters: big-picture thinking and meaningful oversight.

Maybe this sounds too mechanistic for what is considered good, traditional governance… but is it? Yes, it’s cutting time on board handwork and fussing. And maybe this could allow them to adjourn the full board meeting faster. But it also takes back time spent on busywork – minutes that can be reinvested into more board discussion, questions, and idea-sharing. Mass production has its boardroom benefits.

Another important benefit of an optimised committee structure is that it allows for better risk management. In an era of increased regulatory scrutiny, ESG considerations, and financial complexities, risk oversight cannot be treated as a side note in a full board meeting. Specialised committees focussed on risk can ensure that the board is adequately informed without getting bogged down in details that may detract from broader strategic conversations.

Moreover, as corporate scandals and governance failures demonstrate, poor oversight results from a lack of expertise rather than a lack of intent. Committees provide the opportunity to bring in external subject-matter experts who can guide directors in highly technical areas such as cybersecurity, AI ethics, and climate risk. Companies like Infosys and Tata Steel have introduced advisory panels within their board structures to enhance their governance quality. The expectation is no longer just oversight but proactive governance that anticipates and mitigates risks before they become crises.

Beyond risk, an assembly-line approach to board governance also helps manage the increasing expectations for corporate transparency. Investors and stakeholders are demanding more detailed disclosures and more frequent engagements with boards. If a board is expected to have meaningful discussions with institutional investors, activist shareholders, and regulatory bodies, it cannot afford to waste time revisiting committee-level work in full meetings. Having specialised, well-functioning committees allows for more seamless interactions with external stakeholders and ensure that directors can speak knowledgeably and decisively on key governance issues.

Despite recent controversies surrounding its chief, the Securities and Exchange Board of India (SEBI) has been pushing for stronger board structures, requiring listed companies to have independent directors and separating the roles of CEO and Chairperson. These reforms align with the global trend of emphasising director independence and committee-led governance. The recent corporate governance lapses at Yes Bank and IL&FS have underscored the need for more rigorous board oversight – a case for a more structured and committee-driven approach.

Ultimately, while the traditional notion of a board as a deliberative body remains intact, its operational model must evolve. Just as businesses have streamlined production, supply chains, and customer engagement, so too must boards embrace efficiency without sacrificing effectiveness. Governance by committee, when done correctly, does not dilute accountability but enhances it. A well-functioning board should not be a bottleneck in decision-making but rather a force multiplier, enabling the company to move forward with confidence.

In the end, the key takeaway is this: governance is not just about ensuring compliance or ticking boxes. It is about creating a structure that allows boards to be truly effective in guiding the company through an increasingly complex business environment. The assembly line may be an unconventional metaphor for board governance, but in an age where agility and accountability are no more buzzwords, it may just be the right one.

Views are personal. Muneer is a Fortune-500 advisor, startup investor and co-founder of the non-profit Medici Institute for Innovation. Ralph is global board advisor, coach and publisher.