The “Minutes” Waltz

Of all the topics in corporate governance, the one that probably gets the least attention from directors is the subject of board and committee meeting minutes.

Yet, they are the official – and legal – record of the activities of a board and its various committees. “Recollections” are unreliable. And the last thing you want is to have one or more directors with their own personal and, worse yet, conflicting notes of a meeting. Accordingly, minutes of meetings should serve as the only source of reliable information for those directors who were unable to attend a particular meeting. More importantly, they should also act as the official record and reminder of the decisions taken and “actions assigned” which will affect the future operations of the organization. Once the minutes have been reviewed and accepted by the board, any personal meeting notes should be discarded. If not, they become “discoverable” in any legal proceedings and a virtual treasure trove for opposing counsel.

Minutes therefore help to refresh memories. Recording meeting events gives assurance that the decisions stemming from a meeting aren’t forgotten or lost and that the energy and time that went into the meeting wasn’t wasted. So, if ever there is disagreement about what happened in a board/committee meeting, the minutes should serve to resolve any dispute or confusion.
Interestingly, if your meeting minutes are typical, they more than likely fall into one of two categories. Category One are short length, minimalist minutes describing as little as possible as to what actually occurred at the meeting and limiting the minutes’ contents to motions approved, or rejected. Category Two minutes, on the other hand, involve very long, highly detailed record keeping outlining in excruciating, mind numbing detail exactly what happened, who said what to whom, and everything in between. But is either one the right way to proceed or is there another more modernist approach which board members need to consider when approving the minutes of their previous gatherings?

So what should the “minutes” discuss and include?
At a very minimum, the minutes should reflect and follow the meeting agenda starting with:

  • the names of all those in attendance; and
  • all documents distributed with the agenda (or at the meeting)

But then what?

According to Robert’s Rules of Order Newly Revised Edition (i.e., the reference often used by not-for-profits and corporations to guide them in conducting their meetings) the body of board/committee minutes should include only the exact wording of motions and the manner in which they were disposed of as well as the count recorded, if any was requested. Not to be included are “judgmental phrases” (e.g. “heated debate”, “valuable comment” or “dummy said”) and especially “discussion”. Minutes are a record of what was done at the meeting, not what was deliberated, debated and discussed.
However, this is now seen as “old school” and perhaps a dangerous approach to the taking of minutes which should instead summarize what was actually discussed in broad terms – but especially points of agreement/disagreement without attribution (unless requested) – and eventually decided at the meeting. Where there is an extensive deliberation before passing a motion, the minutes should summarize the major positions of each side. The minutes should also include a short explanation of the reasons for the decision.

Interestingly, there is also a legal reason for taking this approach called the “Business Judgement Rule” in which Courts generally will defer to the “business judgment” of a Board in determining whether it has discharged its fiduciary duties but especially the duty of care.

Where a Board has made a business decision “honestly, prudently, in good faith and on reasonable grounds”, a court will generally not second-guess the judgment of the Board. Decisions can be wrong but only so long as the decision was the product of a good, deliberate, independent process and diligent thinking. And this process MUST be documented in the minutes!

Of course, the minutes SHOULD NOT attempt to write everything down everything that was said and by whom. But it is now also best practice to indicate the time spent (that’s why they are called “minutes”!), as well as the list the questions asked by directors on major issues to indicate the degree of diligence (duty of care) and “probing” of management’s recommendations that they exercised.

The minutes should also indicate when directors entered and left the meeting during the discussions to show their full, partial or non-existent participation in the various agenda items. They should also record any declarations of conflicts of interest and that the director/committee member then left the meeting for the agenda item where the conflict applied.

A SPECIAL WORD ABOUT “IN CAMERA” SESSION MINUTES

Questions often arise as to what the minutes of in camera board/committee minutes should include. (In camera sessions are those in which the management of the organization are excluded and only the directors participate.) For full board meetings, there are only a few reasons as to why an in camera session should be used. The first is to fire the CEO. The second is to set the CEO’s compensation. And the third, and most frequent use of in camera sessions, is to give the more timid directors the opportunity to express views that they, for some reason, felt hesitant to state in the presence of the CEO. Great board chairs however seek to minimize these third situations by coaching their ‘shy-guy directors’ to be more brave as they go forward.

Amazingly, some boards incorrectly believe that in camera meetings should occur without any minutes at all! How crazy is that especially when you consider the importance of the first two matters (firing a CEO or setting the CEO’s salary) and that a director might be sued and called into court to “recall” what happened” with each of the other board members “recalling” events differently to cover their own backsides. Official minutes, on the other hand, will tell the official version of what happened.

But in camera minutes are slightly different from regular board/committee minutes. Decisions on the CEO’s termination and compensation are recorded as discussed above and indicating the general tenor of the conversation held by the directors. However, for any other matters, I usually tell my clients to chronicle only the questions that the directors asked during the in camera and concluding with them as “matters to be discussed with and resolved by the CEO before the next meeting”.

Distributing Meeting Minutes

When it comes to approving the official minutes of a board/committee meeting, remembering what actually happened at the meeting fades with the passage of time and can result in wildly different recollections. Important details about the board’s deliberations or the processes it undertook can be left out, or misstated and sometimes even document activities that did not occur. That’s why it’s important to distribute to the meeting’s attendees a draft of the minutes as soon as possible, usually within two days of a meeting’s end and certainly no longer than seven. Proposed amendments should then be noted in a “tracked-changes” document and recirculated among attendees as often as needed until there is agreement.

In conclusion

Boards should view their board/committee minutes as a pre-emptive call to protecting themselves in the event they are called upon to explain their previous actions and decisions. Yet many boards either fail to consider this thereby leaving their firms and themselves vulnerable. So here’s the big, uncomfortable question for Caribbean directors: to what extent does your board have the assurance it needs regarding the quality of its official minutes as a reliable record of past board/committee decisions and events. If you think that there is room for improvement in the way your board carries out this important governance function, you might want to consider sending them to one of the corporate governance training programs currently available in the region – like the extraordinarily unique 3 day Chartered Director Program currently being offered by The Caribbean Governance Training Institute. After all, it’s not education which is expensive, but rather ignorance.

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