Board Committees and Director Departures

The role of board-level committees in corporate governance

“…The Italian Code specifically recognises flexibility regarding the establishment of the nomination committee, notably mentioning that companies with concentrated ownership, even large ones, can assign the functions of the nomination committee to the board of directors (Recommendation No. 16 (Italian Corporate Governance Committee, 2020 [17])).…”

“…The establishment and functions of the remuneration committee differ among jurisdictions, some tending to have detailed provisions, others only recommending its establishment. As an example, Italy's Corporate Governance Code details the role of the remuneration committee, whose first duty is to support the board in the development of the remuneration policy, submit proposals or issue opinions to the board on remuneration and related performance objectives, monitor the application of the remuneration policy, verify the effective achievement of the performance objectives, and periodically evaluate the adequacy, overall consistency and actual application of the policy for the remuneration of directors and key management personnel (Italian Corporate Governance Committee, 2020 [17]). The United Kingdom adopted a "say on pay" legislation in 2002, followed by many other jurisdictions (Edmans, Gosling and Jenter, 2021 [20]).…”

“…The European Commission favours the audit committee approach and recommends that the audit committee also monitors the procedures established for the evaluation and management of risks (European Commission, 2005 [1]). Italy's 2020 Code of Corporate Governance took an alternative approachin companies adopting the traditional governance systemby combining risk management and internal control within a single control and risk committee, 17 different from the compulsory audit committee required by the EU Directive 2006/43/EC. It mentions that this committee supports the board's assessments and decisions relating to the internal control and risk management system and the approval of periodical financial and non-financial reports.…”

“…It shall formulate and monitor the implementation of a detailed risk management policy which shall include 1) a framework for identification of internal and external risks, including financial, operational, sectoral, sustainability (particularly, ESG related risks), information, cyber-security risks; 2) measures for risk mitigation including systems and processes for internal control; and 3) a business continuity plan. 17 "Such a name highlights, again, the central position of the risks and distinguish such a body from the Board of statutory auditors as "audit committee", as imposed by the recent rules in matter of auditing, whose duties remain clearly separate from the Board of Directors' preliminary needs" (Article 6 (Italian Corporate Governance Committee, 2020 [17])).…”

“…In Italy, the establishment of a sustainability committee was suggested for large companies by the 2015 version of the code. However, the new code of 2020 does not properly recommend anymore the settingup of a sustainability committee for several reasons (Italian Corporate Governance Committee, 2020 [17]). First, sustainability is now to be integrated in the business strategy (Principle 1).…”