Organizations differ by many factors, including legal and operating structure, size, industry, and geographic markets. In any organization, the board of directors bears the ultimate responsibility to monitor, oversee, and direct an organization. But the decision on whether to implement an executive committee of the board of directors is organization specific.
Whether an organization is large or small, the benefits to an executive committee of a board of directors include the following:
- In most organizations, regardless of type or size, board meetings occur only on a periodic basis, which can make it challenging to meet obligations. (Note: Executive committees of tax-exempt, non-profit, governmental agencies and similar organizations may have different objectives than discussed here but can still achieve significant benefits for the organizations.)
- The creation of an executive committee can improve the flow of information that assists management, the board and other owners in governing effectively.
- An enhanced ability to monitor and consult can aid the board, CEO, general counsel (GC), and CFO in carrying out effective corporate governance.
The roles of GCs and CFOs in all forms of organizations have always been difficult balancing acts. The GC must be an expert advisor to the company’s board of directors and CEO and must fulfill significant legal obligations to the company’s owners and creditors. (see E. Norman Veasey and Christine T. Di Guglielmo, Indispensable Counsel, Oxford University Press, 2012 https://books.google.com/books/about/Indispensable_Counsel.html?id=tfvp7xlmtC8C).
The obligations of boards of directors to monitor, oversee, and direct the affairs of an organization have a similar level of complexity. An executive committee can assist a company’s board and management to govern effectively. Providing relevant and timely oversight and insight is one of the important checks and balances in managing and directing the affairs of a company.
What Is a Board Executive Committee?
An increasing number of organizations have created an executive committee to address matters like governance, oversight, and management responsibilities that often need monitoring and attention between regularly scheduled board meetings. The roles of executive committees can vary among companies and with changing circumstances within a company. To provide a sense of such roles, the following are samples of executive committee charters from three different companies:
Walmart Inc. (Nasdaq Large Cap). Walmart is a large global retailer; its executive committee charter can be downloaded from its website (https://tinyurl.com/4nsd8puv).
Purpose: Walmart’s executive committee’s purpose is to exercise the powers and duties of the board between meetings and while it is not in session as well as to implement the board’s policy decisions.
Membership: The committee consists of no fewer than three members who are determined by the board, including the CEO, and, if a different person, the chair of the board. The committee may form and delegate authority to subcommittees of one or more members when appropriate. As of 2024, the Walmart executive committee comprised the following four members: chairperson of the board, lead independent director, CEO and president of Walmart, and CEO and president of Walmart–US (https://stock.walmart.com/governance/board-committees).
Meetings: The executive committee can meet as often as it is determined to be necessary or appropriate. The chairperson may direct appropriate members of management and staff to draft agendas and related background information for meetings.
Committee authority and responsibility: The basic responsibility of the executive committee is to exercise business judgement in best interests of the company and its shareholders. Members may rely on the honesty and integrity of company management, outside advisors and auditors, to the fullest extent permitted by law. The charter gives the executive committee the authority to exercise all powers and authority of the board, subject to certain stated limitations.
Cboe Global Markets, Inc. (Cboe BZX Large Cap). Cboe provides market infrastructure and global derivatives and securities markets; its executive committee charter can be found on its website (https://tinyurl.com/4z5uvjtv).
Purpose and authority: The executive committee acts on behalf of the board during intervals between meetings of the board when action is desirable, but convening a special board meeting is not practical.
Composition: The executive committee consists of the chairperson, the CEO (if a director), the lead director (if any), and such other number of directors that the board deems appropriate, provided that at all times the majority of the directors serving on the executive committee are “independent” directors. As of Mar. 18, 2025, there were seven members: the non-executive chair, CEO, and five directors who were chairs of other board committees (https://ir.cboe.com/governance/committee-composition/default.aspx).
Meetings: The executive committee meets when it deems it necessary or appropriate.
Responsibilities: In furtherance of the committee’s purpose in addition to other responsibilities that may be assigned by the board, the executive committee may exercise all of the powers and authority of the board in the management of the business and affairs of the company when board action is desirable but convening a meeting is not practical, except for certain matters required under Delaware law that must be submitted for stockholder approval.
AAR Corp. (NYSE Small/Mid Cap). AAR is a provider of aftermarket aviation services to commercial and government users; its executive committee can be found at https://tinyurl.com/5ynbx2jc.
Purpose: This committee is appointed by the board to support it in the performance of its duties and responsibilities with respect to other matters referred to it by the board for deliberation or action between regularly scheduled board meetings.
Organization: The executive committee consists of three to five members of the board of directors, including the chairperson of the board, the CEO, the lead director, and up to two other independent directors. As of the most recent proxy, the committee consisted of the chairperson/president/CEO, and the chairs of four committees (i.e., audit, human capital and compensation, aviation safety and training committee, and nomination and corporate governance; https://www.aarcorp.com/en/about/board-of-directors).
Committee authority and responsibilities: The committee’s purpose is subject to the limitations imposed by the board, applicable law, and the company’s by-laws. In addition, the committee shall have no power or authority to amend the company’s certificate of incorporation, adopt an agreement of a merger or consolidation, recommend to shareholders matters related to the dissolutions or sale/lease of substantial assets, or declaration of dividends. All actions of the executive committee must be reported at the next meeting of the board of directors.
Executive Committee Functions and Limitations
An executive committee can be a flexible resource for monitoring a wide range of developments on a continuous basis. It can be on the lookout for issues that warrant consultation and discussion among the CEO, CFO, GC, and other senior management.
Second, an executive committee can serve as a sounding board for the CEO, CFO, GC, and other members of senior management, as well as independent directors, to explore emerging issues or concerns that may or may not ultimately require a presentation to the full board.
Third, the effectiveness of a company’s corporate governance—its system of “governing the corporation”—depends heavily on creating the right checks and balances and information flows. An executive committee can institute flexible and efficient information processes that start, stop, and change easily as needed.
An executive committee can institute flexible and efficient information processes that start, stop, and change easily as needed.
Executive committee access to “inside the company” sources, with the ability to inquire further as needed, can strengthen the checks and balances within an organization. One cannot help but wonder if better communications and stronger information flows at early stages might have helped to avoid the highly publicized and massive reputational and financially damaging control breakdowns that the courts found at Wells Fargo, Boeing, and Marchant (Blue Bell Ice Cream), as discussed in previous columns. When companies suffer such damages, it may also affect individual directors and officers.
It is important to note that the business judgment rule protects from liability the affirmative acts of a board. What it does not protect, however, are failures to act, particularly the utter failures to act articulated in Caremark (https://tinyurl.com/2v62y294; see H Stephen Grace, Jr., Suzanne Gilbert, Joseph P. Monteleone, S. Lawrence Prendergast, Corporate Governance: Understanding the Board-Management Relationship, American Bar Association, Business Law Section, 2024, p.8).
Finally, executive committees can function without creating an undesirable “two-tier” power dynamic inside the board, whereby the executive committee takes on decision-making authority that under the bylaws properly belongs with the full board. Charters for executive committees should describe specific limitations on committee activities and executive committee functions to ensure there is no confusion about where power and responsibility ultimately lie.
Selected Actions by Executive Committees
The following are examples of selected actions by corporate executive committees:
- PVH Corp./DE/ (NYSE Small Cap) filed a Form 8K on Feb. 5, 2025, reporting that the executive committee declared a quarterly dividend on the company’s common stock (https://tinyurl.com/ywme8xv8).
- Expedia, Inc. (Nasdaq Large Cap) filed a Form 10K as of Jun. 30, 2015, reporting that, in April 2012, the executive committee, acting on behalf of the board, authorized a repurchase of up to 20 million shares of common stock. In February 2015, the executive committee, acting on behalf of the board, authorized an additional repurchase of up to 10 million shares of common stock (https://tinyurl.com/mu2tjs65).
- Vishay Intertechnology, Inc. (NYSE Small Cap) renewed its authorization of the executive committee of the board to execute programs to repurchase up to $150 million of common stock on the open market (https://tinyurl.com/mpe3amhs).
