The company’s board of directors can empower a committee or director to oversee mission-related decisions. But there are limits to a board’s ability to delegate its authority, so oversight clauses should be drafted with care.
An impact committee or director could assume responsibilities such as one or more of the following:
- overseeing the development of an impact strategy and work plan
- monitoring and reporting to the full board on the progress of the plan and the company’s impact performance
- addressing the divergence of views on mission that will inevitably arise from time to time
- monitoring compliance with PRI-related obligations
The Company’s board can limit the committee’s or director’s authority to an advisory role, or the director or committee may have the authority to make binding decisions for the board. There are limits, however, on the board’s ability to delegate its authority, so the scope of any authority to make binding decisions should be drafted with care and specificity.
If a specialized committee or director is desirable, the parties must spell out what powers the committee or director will have, how the individuals will be chosen and how decisions will be made.
Sample language: The Company shall have [an Impact Committee composed of X directors, at least X of whom shall be independent] OR [an Impact Committee composed of X members, including the Series ?? Director(s)] OR [an Impact Committee composed of X members with relevant experience, X of whom shall be appointed by the Board and X of whom shall be appointed by [the Investors][the Founders] OR [an Impact Director who shall be a member of and appointed by the Board].
Limited oversight duties
Sample language: The Impact [Committee] OR [Director] shall monitor the Company’s compliance with the Impact Policies described in Exhibit X, and shall be responsible for the Company’s reporting thereon as described in [reference term describing impact reporting requirement].
Comprehensive oversight duties
Sample language: The duties of the Impact [Committee] OR [Director] shall include but not be limited to overseeing the development of the Company’s impact objectives, strategy and work plan; reviewing the Company’s progress in achieving its impact objectives and recommending to the Board any changes to the strategy and work plan that the Impact [Committee] OR [Director] believes are warranted; recommending to the Board the standards the Company uses to measure impact; monitoring the Company’s impact measurement procedures and internal reporting; reviewing and approving the Company’s annual impact reports; providing a forum for any conflicts between the Company and the Investors relating to the Company’s [mission] OR [the Impact Policies described in Exhibit X]; and advising the Board concerning all aspects of the Company’s social and environmental impact.
Oversight for PRIs
Sample language: The Company will establish a PRI oversight committee (the “PRI Oversight Committee”). The PRI Oversight Committee will monitor the Company’s compliance with the Company’s PRI related commitments. The prior consent of the PRI Oversight Committee will be required for the following actions:
(a) Any disposition of PRI funds;
(b) Reviewing and approving reports to PRI investors;
(c) Any deviations from the Company’s business, strategy or purpose that could impact the specific program for which PRI funds were invested