Effective governance must weave together many interconnected strands, including shared objectives and values, a commitment to high standards, a deeply ingrained code of conduct, well-defined roles and responsibilities, and clear lines of accountability. Recommendations include:
Clearly delineate and document the role and authority of all key parties involved in management of the endowment. Boards, committees, investment staff and outside advisers can work together in many different ways to accomplish the myriad tasks involved in endowment management. Above all, it is critical that committee members know what is expected of them; this orientation should take place when they are recruited to join the endowment committee.
Choose the chair of the committee carefully. A proficient chair is essential to an effective investment committee and the president and chair of the full board should be certain that the leader of the investment committee is carefully chosen. It is impossible to overstate the importance of this critical role: it can mean the difference between excellence and mediocrity.
Preserve institutional memory. Proper committee structure should seek an appropriate balance in time served by its members. Investment committees where the average tenure of committee members is short, turnover is high and institutional memory is lost are unlikely to be effective. Stability in membership is extremely important. On the other hand, a modest level of regular turnover is desirable, in order to bring fresh ideas, new energy and different perspectives to the committee.
Ensure open and regular communication with other key members of the institution — especially the finance committee and the full board. Important stakeholders should be kept abreast of the investment committee's work, results and any major changes that are taking place.
Require an orientation for each new committee member. As new members are brought onto the investment committee, the chief investment officer (if applicable), committee chair and other staff who support the committee should provide them with a formal orientation before their first meeting.
Members should be prepared to attend all meetings. While it might be impractical, if not impossible, to expect committee members to attend all meetings, the implication is that missing a committee meeting can have consequences for the performance of the committee.
Keep comprehensive minutes to document the proceedings and help the committee recall the context surrounding key decisions from meeting to meeting. Continuity demands maintaining informative minutes that include much more than simply actions taken or decisions reached. The specific rationale for major decisions should also be recorded. Committee members should not be expected to recollect why past decisions were made. Detailed minutes assist members in fulfilling their fiduciary duties to monitor the results of prior decisions. Better context should lead to better decisions.