The Governance Library curated by Matthew Doyle
Board Room · Committee Structures & Terms of Reference
Case study · NatWest Group
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Board Room · Framework · Governance Architecture
Committees & Terms of Reference
The scaffolding the chair is actually chairing.
Case · NatWest Group · 2023
After the crisis — the committee map was redrawn
A board that had chaired the UK's most public debanking crisis looked at its own committee architecture and decided something was wrong with the map.
Why do boards have committees at all?
Agency theory gives the cleanest answer — Jensen & Meckling, 1976.
Committees reduce information asymmetry inside the board the way the board is meant to reduce it outside the board.
Jensen & Meckling · 1976 · agency theory
Two floors · UK Code + PRA / FCA
The general FTSE floor. And the regulated-FS floor.
General FTSE · 3 committees
UK Corporate Governance Code 2024
Audit · Remuneration · Nomination
Comply-or-explain. Shareholder-policed.
vs
Regulated FS · 4–5 committees
PRA SYSC 4.3A + FCA accountability
+ Risk Committee · + Conduct Committee
Effectively mandatory. Regulator-policed.
Why committees · three specific jobs
Three things the full board cannot do.
I
Go deeper
A two-hour audit committee examines what a ten-minute board item cannot.
II
Specialism
A chartered-accountant audit chair asks questions the rest of the board can't.
III
Independence
Audit, Rem, Nom: wholly or majority-independent. CEO chairs none.
Committees recommend. Boards decide. That's the formal rule.
In regulated FS firms, the operating rule is different — committee authorities mean the committee decides and the board ratifies.
Case · NatWest · summer 2023 · six committees, one gap
Six committees. One gap.
Audit
Financial controls · external audit
Group Risk
Credit, market, operational, liquidity
Board Risk
Prudential risk oversight
Nominations & Governance
Culture · values · composition
Group Performance & Rem
Executive pay · incentives
Reputational & conduct
Fell between four committees
Designing terms of reference
Four ToR design decisions that separate design from boilerplate.
I
Purpose — one-sentence test. Can the committee state it?
Purpose
II
Primary vs shared ownership — who picks up the phone when it's ambiguous?
Ownership
III
Delegation limits — decide, recommend, escalate.
Delegation
IV
Membership and cadence — Walker 2009 for bank risk committees.
Membership
The three lines can become an architecture of comfort — legible, auditable, and potentially hollow.
Michael Power · The Audit Society · 1997
Three honest limits
ToR design — the three qualifications.
I
Proliferation
Committees beget committees. King IV cautions against inflation.
II
Formal–informal gap
The real work happens in corridor conversations and pre-meeting bilaterals.
III
Comply-or-explain ≠ statute
UK discretion vs US SOX statutory audit-committee mandate (we come back in Note 07).
Three things to carry forward.
A reading
FRC 2024 Guidance on Board Effectiveness. Paired with Michael Power, The Audit Society (1997) — on the three lines as 'architecture of comfort'.
A question
The reputational-risk gap at NatWest in July 2023 sat across four committees. What is the equivalent gap in your own architecture right now — the issue no single committee owns?
The wider library
Note 01 Chair · Risk Room 01 Three Lines of Defence · Note 03 Sessions · Note 04 Agenda — committees as scaffolding, chair as chairer.
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