When you are involved in corporate governance, one of your key duties is to ensure the corporation has regular meetings of the board of directors. Although each jurisdiction has its own laws governing the frequency and agenda of corporate board meetings, there is much more to board meetings than meets the eye. If you properly prepare, you can have productive board meetings that actually help the company meet its goals. Here are 10 dos and don'ts for running successful board meetings.
Although all jurisdictions are different, there are general rules which apply to corporate board meetings. The most important rule is to give proper notice that there will indeed be a meeting of the board of directors. If the directors are not given proper notice of a meeting, resolutions passed at the meeting could turn out to be void. That means it is essential to give the right information to everyone in advance of the meeting date. Before scheduling the meeting, make an effort to determine whether the board members are available on that date.
Directors are entitled to “reasonable notice” that there will be a meeting. A formal notice of meeting should be sent by mail to ensure you can track its receipt by each director. A written notice of meeting should include the following details:
Carefully review these materials before sending them to the directors. If any board member prefers to be served notice via electronic mail, be sure to use your email providers' receipt option to track receipt of the notice.
Although it should be obvious that every meeting must have an agenda, many corporate leaders give insufficient thought to the substance behind the agenda. Before you send out the notice of meeting, brainstorm about the biggest issues facing the corporation. Focus on areas where the corporation needs guidance and advice. Some CEOs struggle with how much information to provide to the board. When in doubt, err on the side of including more details in the board packet rather than less information. You do not need to give a long explanation of the issues during the meeting. Instead, assume that the directors have reviewed the materials in the board packet and ensure they have the opportunity to ask questions and speak their minds.
Every company and board meeting is unique; however, here are some general tips on how to conduct a meeting properly by fine-tuning the agenda.
Of course, there are many other agenda items that would be appropriate in any given circumstance. Review your company's annual report and strategy documents before completing the agenda.
It is important that the board of directors have full authority to act on corporate business during the board meeting. If there are not enough members present, then the board of directors will not be able to get any issues resolved and the entire meeting will have been for naught.
Since members of the board are not always available on the date of the meeting, it is important for each person who does not attend to communicate their intentions in writing. The best way to prepare for this possibility is to send each director a waiver of notice of meeting along with the written notice of meeting.
The waiver of notice should contain language demonstrating that the director agrees and consents that any business which may be transacted at the meeting is valid and legal. Although not all state laws require corporations to retain their waiver forms, you should always aim to follow best practices by filing the notice of meeting and waivers in the corporate records archive.
Executive sessions are an important part of corporate governance. An executive session is a separate meeting or time within a meeting where the executive staff is asked to leave the room. Although an attorney is often allowed to remain in the room, there are often hurt feelings when the rest of the executive team are asked to leave a board meeting. Do not be offended by the notion of the executive session. In fact, as a leader of the company, you should frequently include an executive session on the meeting agenda.
The executive session gives the directors the opportunity to evaluate staff performance and consider confidential matters outside the purview of the employees. This may make some staff uncomfortable, but it is not necessarily a bad thing or a sign that employees are about to be disciplined or fired. If you have ever had anxiety about executive sessions, this list of issues that are frequently dealt with during executive sessions should put your mind at ease:
In order to ensure you handle executive sessions effectively, be sure not to call for a surprise session during the middle of a meeting—such a move will breed unwarranted paranoia. The best practice is to always include time for an executive session during every board of directors meeting. This also helps the directors form an identity that includes strong leadership, trust, transparency, and communication.
Appoint a person to take the minutes of the meeting of the board of directors. The purpose of keeping the minutes is to “provide a memorialized chronology of key information such as board actions, elections of officers or directors, and certain reports from committees and staff.” This can be a difficult task, so make sure you have a secretary or other experienced person who is a good note-taker. In order to help the person be an accurate transcriber of the facts, give them a list of things that should normally be included in the minutes.
Here is a practical list of things should be included in the minutes. Please remember that these are not bright-line rules; instead, consider the needs of your company and edit these suggestions accordingly. Your board meeting minutes should include:
The Association of Corporate Counsel's guidelines on meeting minutes state it is not wise to make an audio or video recording of the meeting, or to attempt to write down everything someone says verbatim. It recommends letting each corporation determine the level of detail they are comfortable with, as long as the company remembers to use a consistent format for all future meetings.
Many boards use Robert’s Rules of Order, which is a rulebook written by American General Henry M. Robert in 1876. Roberts wrote the book because he was tasked with sorting out several meetings and conflicts after the Civil War. He realized that board meeting were devolving into anarchy and therefore created a process to help people make decisions. The English parliamentary-style rules have been widely adopted all over the world. Although Robert’s Rules of Order can be helpful, use of the book is not mandatory to have a valid meeting. The use of formalisms such as making motions, seconding the motion, calling the question, and recording the votes may not be right for every board.
Robert’s Rules are over 700 pages long and contain many arcane and complicated procedures. Recent revisions of Robert’s Rules have been designed to stop rule by consensus, focusing instead on quickly making decisions by yes or no votes. In contrast, consensus operates in order to prevent the creation of “winners” and “losers.”
If you decide to make decisions using consensus, the general way decisions are made are as follows:
Under this process, it is possible for a single person to have veto power over the entire group. That makes strong leadership and facilitation of productive discussion crucial to making rule by consensus viable.
There are certainly pros and cons to rule by consensus and to traditional parliamentary-style decision making. When setting up a new board or planning a board meeting, it is most important to consider which method is right for your corporation.
Proper documentation is a key part of planning successful board meetings. A corporate resolution helps you structure the process of the meeting. Corporate resolutions record the details about a business issue, details of decisions made by the board of directors, and includes signatures of each person on the board.
Every time the board of directors makes a formal decision, it should write a corporate resolution documenting the action taken.
This creates a legal record that establishes a fact pattern that may be necessary if the company ever faces legal questions.
In some instances, proof of corporate resolutions are required in order to finalize a sales contract, execute a commercial lease or buy property, and open bank accounts and apply for loans. Corporate resolutions are also helpful in keeping track of old and new business, which in turn makes it easier to plan future meetings and set strategy for the company.
Whenever a group meets, it is tempting to read from reports in order to bring the board of directors up to speed. However, this is mostly a waste of time. As we explained above, you should always act on the assumptions that directors have read the materials and are prepared to have a discussion.
The best way to prepare is to discuss the committee reports with the committee chairs before the meeting. Reports should only be included in the meeting when there is truly something to report.
Simply listening to reports wastes time, forecloses discussion, and can cause some people to just tune out. Instead, open the floor for discussion. Although you definitely want the board of directors to make a decision, discussion and questioning is an important part of that process. You need to be a good facilitator to have a proactive and positive board meeting. You can help this process by providing directors with the information they need in order to ask the right questions. Sometimes the board will reach a decision right away and unanimously. In other times, the board may need more information, exploration, and discussion in order to find the right solution. In either case, your role as a steward of the corporation is to lead discussion without reading from reports.
When Harvard Business Review researched the effectiveness of corporate boards, they found some surprising results. Factors traditionally considered to be hallmarks of good corporate governance, such as equity involvement, perfect attendance, and board size, were all found to be negligible in creating proactive and successful leadership. The downfall of Enron is often called an example of corporate governance gone wrong, but in reality the Enron board was a model of the very practices often listed as the most likely to lead to success.
Harvard Business Review cited UPS as a model for good corporate governance. Their secret? Board members were comfortable allowing each other to express strong opinions even when there was serious disagreement about the proper strategy to pursue. The company trusted each other to make a stunning decision to turn away from international partnerships to become a truly global business on their own. The move paid off, and today UPS is one of the world's biggest companies.
As the example of UPS demonstrates, “showing up” is the most important thing you can do to ensure successful board meetings. But “showing up” does not mean never missing a meeting. Instead, showing up means fostering a dynamic between board members where transparency and candor are valued rather than punished. Unlike UPS, Enron's board and CEO were doomed by mistrust. When the CEO did not trust the board enough to share information, he produced a report inches thick with key information buried in footnotes. Enron's CEO also failed to inform the board of directors that a whistleblower had come forward with massive financial fraud claims.
Enron's board of directors failed to show up to do their jobs appropriately, never once demanding to know why the company repeatedly issued contradictory public statements. Rather than becoming more involved, the board chose to be hands-off. The decisions made by Enron's leadership led to a very public, and costly, meltdown.
In the Forbes article How to Run Your First Board of Directors Meeting, Jeff Thermond shares the lessons he learned from his first board meeting, which he completely screwed up. His most important piece of advice is to avoid surprising board members. How do you avoid catching members off guard? Consider these tips:
When you consider the best practices for corporate governance, don't overlook the process of obtaining and nurturing a good board of directors. Planning a productive board meeting requires preparation, attention to detail, and consistency. By following these dos and don'ts, your board meetings will help the corporation grow and prosper.
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