Twelve large company audit committee chairs shared their pandemic-informed views and practices on audit committee meeting formats, agendas, expanding and core responsibilities, and committee composition, which are nicely summarized in this new Tapestry Networks’ report: “Adding value: Perspectives on the audit committee’s dynamic role.”
Key takeaways include:
- Future annual meeting calendars will likely include a mix of in-person and virtual-only meetings. Advantages of virtual meetings noted by audit chairs included meeting efficiencies, reduced travel-related physical wear-and-tear, opportunities to engage with more members of management, and enhanced quality of pre-meeting materials. Stated disadvantages included building and retention of culture and trust, and concerns about less robust dialogue and avoiding discussion of sensitive or controversial issues.
- Most boards are still trying to determine how to allocate ESG oversight and many allocate responsibilities across several committees. That said, the audit committee is commonly charged with responsibility for reporting quality and associated internal controls. Audit chairs expressed concerns assuming ESG responsibilities for several reasons, including unsupportable management commitments that will outlast current management’s tenure and the fact that those responsible internally for ESG information, such as diversity and GHG emissions, are likely not accustomed to the rigorous controls and procedures that support conventional financial reporting. They also noted the importance of including any ESG-related oversight responsibilities in committee charters.
- Largely pandemic-driven, audit chairs spent more time over the past year on risk oversight; cybersecurity/data privacy; the finance talent pipeline (as fewer positions are tied to a specific geography); internal audit oversight and talent that can effectively navigate increasingly remote environments and new technologies; and acquiring and integrating new companies virtually.
- Audit chairs are seeking candidates with targeted skills/attributes such as IT/cybersecurity expertise, complementary financial skills, and diversity, in addition to robust business experience.
- Virtual onboarding activities are likely to remain a part of the onboarding process going forward.
See our recent reports: “Pandemic-Prompted Board Practices,” “Nom/Gov Committee Considerations,” “Back to the Boardroom?,” “Virtual Board/Committee Meetings: Here to Stay?”, and additional resources on our Audit Committees page.
This post first appeared in the weekly Society Alert!