The principle of proportionality dictates that governance structures should be appropriate for the company's size, complexity, and risk profile. For smaller or less complex organizations, establishing a full suite of specialized committees (e.g., risk, audit, nominations) may be disproportionately burdensome. In such circumstances where a committee like the risk committee is not formed, the board of directors cannot abdicate its responsibility. The full board must therefore directly undertake the roles and responsibilities that would have been delegated to that committee to ensure proper governance and oversight are maintained. This aligns with the fundamental principle that the board holds ultimate responsibility for the company's strategy and risk management.

B. The board's role is one of oversight and supervision, not direct participation in the operational work of its committees. This would defeat the purpose of delegation and blur lines of accountability.

C. The board has the ultimate and non-delegable responsibility for risk oversight. It must undertake this work, especially in the absence of a dedicated risk committee.

1. G20/OECD. (2015). G20/OECD Principles of Corporate Governance. OECD Publishing, Paris.

Section VI.D, Page 47: "The board is... ultimately responsible for overseeing the risk management system... While boards are also well advised to establish specialised committees to support the full board in performing its functions... the board remains collectively responsible for the work of its committees." This establishes the board's ultimate responsibility, which it must fulfill directly if a committee is not in place.

2. Financial Reporting Council (FRC). (2018). The UK Corporate Governance Code.

Application Section, Page 3: "The Code should be applied proportionately. Smaller companies... may judge that some of the provisions are disproportionate or less relevant in their case." This explicitly sanctions the tailoring of governance structures, such as the formation of committees, based on proportionality.

3. Rock Center for Corporate Governance at Stanford University. (2017). On the Radar: Proportionality in Corporate Governance. Closer Look Series: Topics, Issues and Controversies in Corporate Governance.

Section: Proportionality in Practice, Paragraph 3: The publication discusses how proportionality allows for flexibility, noting that in smaller entities, "the full board may be able to handle tasks typically delegated to committees, such as risk oversight or compensation setting, without the need for a separate standing committee."