Effective Board Meetings: Do’s & Don’ts for Board Members & Executives
Richard: Okay, good afternoon everyone and thanks for taking the time to join today’s webinar with Diligent and The Directors College. We’re going to be covering the topic of effective board meetings, dos and don’ts for board members and executives. My name is Richard Harrison, I’m the senior vice president here at Diligent. I’m joined today by Marvin Ryder, professor at McMaster University and faculty member of The Directors College. Marvin is an extremely experienced director currently serving as the vice chair of the Hamilton Health Sciences Research Institute. He’s got a lot of great advice for board meeting preparation and execution.
Before we start today, a couple of just quick housekeeping items. Today’s webinar should last about 30 minutes. It could go two or three minutes over. We’ll try and keep it as close to 30 minutes for everyone as possible. It will be recorded, and a replay will be sent out to all registrants shortly after the session. Please feel free to share the replay with your colleagues. We will be asking a few poll questions throughout the webinar, so please participate if you can when they pop up on your screen. The first one is just a couple minutes into this, and also feel free to ask your questions at any time by utilizing the questions pane in the GoToWebinar panel. I’ll be keeping an eye on that. Before we start the presentation, we would like to do a quick introduction of Diligent and The Directors College, just for those of you that do not know.
I’ll start with a little bit on Diligent. We’ve been providing board portal technology for the last 15 years or so. We’ve helped over 4500 companies, consisting of 140,000 board members globally, in making the transition to digital communication and collaboration technology. We’re very successful in what we do. We have over 99% client retention rate to prove it, we’re really proud of that. The Directors College provides competency based programs to produce prepared and insightful directors with the ability to promote collaboration in the boardroom. The Chartered Director Program is Canada’s original university accredited director developer program. It offers a unique learning experience that covers not only formal rules and practices, but also individual and collective behaviors associated with high performing boards.
With that, I’m going to introduce everyone to Marvin Ryder. Marvin, let’s get started on our webinar today. We’re going to take a quick look at a few of the topics that we discussed previously on the call. This is going to encompass the key ingredients to a successful meeting and determining the purpose, how to communicate the meeting effectively, developing a focused agenda for materials and pre-reading, the importance to meeting minutes and how technology can help at the beginning of that process during and after the meeting. Marvin, one thing we talked about the other is what a board could be criticized for. The question that I had for you was just around, what does agenda ownership actually mean?
Marvin: Thank you, Richard. If you don’t mind, I’m going to just pull a Donald Trump for a second and just say hello to everybody. I’m a professor of marketing and entrepreneurship at the DeGroote School of Business at McMaster University. I’m not here to talk about that, I’m really here to talk to you about my hobby. I’ve had 20 years experience being a member on boards, I’ve chaired a hospital board, I was appointed by the providence to create the new city of Hamilton so I chaired the transition board. The Directors College has been around for 14 years as a joint venture between McMaster, the DeGroote School of Business, and the Conference Board of Canada, the Toronto Stock Exchange, a number of partners who got behind us 14 years ago to try to get more skilled board members so we wouldn’t have the Enrons of the world and the Worldcoms of the world.
The slide you’ve got in front of you, boards are criticized for, really the starting point there is to understand that I’ve never heard of a board that considered itself effective that has ineffective meetings, or vise versa. They usually go hand in hand. If you feel the board is effective, it means you’re having effective meetings. Just underneath that, we’ve got a few key ingredients to having effective meetings, one that I’ll highlight there. Before I get to your answer, and I haven’t forgotten your question, is this idea of this shared mission. One of the things that worries me very much is when you have constituency based boards, and people feel they’re there to only represent a certain constituency’s interest. Once you’re appointed to the board, it is very important to have an orientation session to let people know that whatever their affiliation is, they have to put that on the back burner and at the board meetings, they’re really doing what’s best for the organization or the company, whatever it happens to be.
Where boards get criticized in their meetings, and you’ve identified one of the big ones, is lack of agenda ownership, meaning that for some reason boards feel that they are the slave of management, that they are there to do management’s bidding. I heard a chair of a police board once say that her mission as chair of the police board was to get the police chief whatever he or she wanted. I would object to that very much. That is not your mission. Your mission is to make sure the police force is meeting the needs of the community. That may be getting the police chief what he or she wants, but it may also be arguing with the police chief over that. You are not the slave of management.
That gets us to the bottom two bullets, director acquiescence or passive behavior. The board is not a rubber stamp. The board is there to ask questions, to get what we like to call reasonable assurance on the directions being proposed by management. Never 100% guarantee, never the same understanding that management would have, but to gain that reasonable assurance. If you sit there and don’t say anything, if you never challenge management, you’re really not fulfilling your mission as a board member.
Richard: Thanks, Marvin. What’s the impacts of that sort of behavior, do you think, on the board’s ability to provide effective oversight to management?
Marvin: Right, so we popped up the next slide here. A lot of this comes to a combination of these five factors. Does the board have the right information in front of it to make a reasonable decision? Does it realize it has the authority? Does it feel it has the courage to make decisions, given the information in front of it? We talked about some other meeting ingredients, how often should a board meet? I served on the board of a credit union that met quarterly, until we were approached with a merger opportunity and at one point, we began to meet every week. You have to change this, depending upon the volume of material and the kinds of decisions that are coming in front of a board. What is the motivation? Do we all understand why we’re there and are we properly motivated, and do we have the knowledge? On the side of the slide, I’ve given you a couple of performance tips and I’d like to point them both out.
First is a skilled board chair. I used to say a strong board chair and people mistook for being an authoritarian chair. I’m not asking that at all. A skilled board chair is very concerned about the dynamics of the meeting, making sure that everyone is contributing, that everyone is prepared, that we’re getting the very best from everybody, and at times, a bit of a traffic cop as well. That is a skill, and therefore I really worry when I meet boards that say, well, it’s Bill’s turn to be the chair, or Susan’s turn, or Ed’s turn to be the chair. You don’t just pass it around because it’s your turn. You really want to select an appropriately skilled board member to be chair. The second performance tip really leads us to our first poll question here, a board evaluation.
I believe that boards and committees should be evaluated on their effectiveness, so the question for the people in the audience is how often do you do board or committee evaluations? Note I’m talking about the effectiveness of the board or the committee, not a meeting evaluation, that’s a different kind of thing. How often do you do an evaluation of the full board or it’s standing committees? We’ll give you a second.
Richard: Marvin, I’m seeing some answers here. It looks like about two thirds of the respondents are saying about once a year. Next answer would be once every three years. Do you have any recommendations about how often management should be soliciting feedback from the board?
Marvin: Well, this is actually an evaluation of the board for the board itself. It isn’t so much for management, it’s for the board itself. I would argue once a year is a nice number to have here, or a nice frequency to have. If you do it too frequently, I think the instrument you’re using to collect the feedback begins to wear out and people say, “What did I write down last time?” and they just write it down again and again. You can measure it too frequently. Once a year seems to be a nice number, we can actually see how we’ve improved or where we may have new reasons to change. Once every three years is starting to be a little long in the tooth, therefore I think this annual evaluation makes more sense to me.
Richard: Right, onto effective board leadership.
Marvin: Really, this is about that skilled chair that I was talking about. Here’s a list, if you’re trying to create a job description for a skilled chair to run a meeting. Here is all the different things that they’re going to do, and I am not about to read through this list at all, but I wanted to point a couple that I think are important. One, defining discussion parameters. Board meetings tend to have a life of their own, and we begin to talk about, let’s say, an acquisition of a piece of property or maybe investing in a new technology, and some board member says, “Well, this reminds me of the situation three years ago when this happened and that happened and I wasn’t very happy about that,” I often play the role of chair in these types of boards and what I always make sure I have is a flip chart nearby. I label the flip chart a parking lot.
When somebody brings up one of these issues that’s a little off the agenda, I thank them for bringing it up, I tell them that it’s a little off the agenda and then I write it down on the parking lot and I promise when time permits we’ll come back to this but I want to keep you focused, I want to stay on the key discussion item we’re here. If we lose focus and start to wander, this is one of the reasons why board meetings can become ineffective. Another key thing I do, and that’s the second highlighted thing is to build consensus. Sometimes a board member is speaking and the board member says something like, “Well, I don’t really feel like I’m ready to approve this but I’m not sure what I want to do,” so then I would negotiate, if you will, or suggest to that board member some different things they can do.
We could table this, we could approve it subject to various types of things, we could ask for some more information. What is it that you need? At that point, maybe other people might jump in and give us their thoughts and then at some point I’d ask for a motion or an amendment to a motion and move the item along. This idea of building consensus becomes very important. Too often, board members see themselves as individuals fighting the fire without off to the side. Another quick one I’ve noticed, the second last one, to ensure the will of the board prevails. The meeting itself is important and so is the outcome, but one of the roles of the chair is to make sure that those outcomes really did happen. When I’m doing an agenda review for the next meeting, I’ll often have the last meeting’s minutes in front of me and say, “Now, what happened to item three? Did you actually buy that piece of property? Did you make that investment? I think the board needs an update. They really need to know what’s going on.”
On the right hand side of that slide, there’s another performance tip and that’s to invest in the board chair for support and development. If you dare let me make another plug, this Directors College, not only does it have basic director education but it runs a special weekend seminar, usually once a year, a chair’s workshop specifically. I do not think it’s a bad idea to invest once you have a chair, especially if that person has never chaired a board before, to send them to something like this just so they understand how their responsibilities are greater now, than they are as a usual director.
Richard: Thanks, Marvin. One of the things that we wanted to talk about was developing the agenda and best practices in that, can you speak to that?
Marvin: Certainly. The first question is a very important one there. Who owns the board agenda, and it’s very clear that is the board itself who owns this agenda, obviously represented by the chair of the board. Typically, what I would do as chair of the board is I would have a meeting with the board secretary and the CEO and I’d go through an outline, a draft outline of the agenda for the next meeting. One of the things I’m doing is, on every item, I’m asking myself the question, does the board have the right information in the package to make a decision? Does every item there have a clearly stated outcome? One of the things I love, you’ve probably heard the term yourself, Richard, is death by PowerPoint.
The finance, the chief financial officer does this 20 page PowerPoint presentation and I’ll say, “What’s the board supposed to do?” “Well, I want them to approve the PowerPoint presentation.” I said, “That’s impossible, too many pages, too many points, can’t be done. Can you distill it down to the specific actions so we know, or is it just background information for us to go from? We really need to have that all clearly specified so that people can act accordingly. That’s why I have to sign off on it on behalf of the board, the CEO signs off on it, and maybe another thing that it doesn’t exactly say there but I think is very important is that there is a date. By that date, that agenda is now set. There are no walk on items. Nothing drives a board crazy, than having items that come on, and on that slide it also mentions the performance tip of having a board calendar so that it’s no surprise to managers what needs to come to what meeting.
Richard: The agenda is being made up of sources from management, and issues that are also being brought up by directors. Can you speak a bit from your experience there?
Marvin: Absolutely. Those are the two key sources. Clearly, management is going to bringing things in. An opportunity arises in the company, and they want to bring that so yes, there’s nothing wrong with management bringing their ideas, also, the issues that are important to the directors themselves. What we’ve got on the right hand side of that slide, I hesitate to call it a template, but in essence it’s a way to format an agenda. The key to this, if you’re looking at it, is that we’ve moved all the action items earliest as possible on an agenda. Yes, you’ve got some boiler play things, the call to order, the chair’s remarks, the approval of the agenda, declaration of conflict of interest, even the approval of amendments, but those take very little time.
While the members of the board are fresh, you really need to deal with the most important, the action items, first. You can see there are really four sources of those. Action items specifically come, there are also board committee reports. They normally have actions that they have pre-digested and are bringing recommendations to the board. The CEO, who may very well have action items in his or her report, and then any strategy items. Obviously strategy is a very important function for the board. That’s one of the key functions of the board, and those need to come early. Later, you can put important items and then item ten I’d like to speak to for a moment, and that’s a consent agenda.
When I served on the hospital board, there would be correspondents that the board would receive, let’s say, from the minister of health or from some other people. We needed to acknowledge receipt of this and make sure we’d read it, but there really wasn’t any discussion so I would group those together in a consent agenda. At the start, when you approve the agenda, you ask board members to make sure there is no item in the consent agenda they want to talk about. I would actually describe it as an omnibus motion to receive all the items in the consent agenda. If somebody does want to talk about it, then under item two they’d say, “Let’s pull that out, we’ll make it a separate item of business.” The other thing I wanted to highlight here is number twelve.
A standing meeting without management, also known as an in camera meeting. Why I like to have a standing item on the agenda is that if we’re having a meeting and suddenly a board member says, “Oh, excuse me Mr. Chair, I want to make sure we meet without management at the end of the meeting,” alarm bells go off. Every member of management wonders, what have I just done? In fact, they may not have done anything at all. Something may have just occurred to that board member. By having a standard item on the agenda, a meeting without management, it doesn’t alarm anybody, it’s no surprise. That leads us to another poll question.
Richard: It does. Just before we cover this Marvin, I was wondering when do you recommend or how do you recommend a director communicate issues that are important to them? Is the best time to do that at the previous meeting? Is it prior to the next meeting by emailing the board secretary? What’s the best way to do that?
Marvin: Right. Usually what would happen is you would get the agenda, a package, we’ll say a week and a half, two weeks before the meeting. If you go through that agenda package and you have an issue that you want the chair to know about, you can either contact the board secretary or you can ask the chair directly. It might be, why is such and such item not on the agenda, and maybe there’s a good reason for it, I can answer that question for you. Maybe we forgot, or maybe we need to do something. If it requires us to have a meeting without management, we can do that right at the beginning or I can even ask you and you might say no, no, leave it until the end, let’s talk about it there. That communication flow should not be stilted. It really should be ongoing at any time that any board member has any idea, they should feel comfortable talking to the chair, if they can’t reach the board chair or the board secretary.
Marvin: Our poll question really is pretty simple. I would like to know from the people attending today, do you have a standing item for an in camera meeting, or a meeting without management? I’m hoping that most people answer yes to this, but I really don’t know.
Richard: Fast answers from everyone, please. Okay, so I’m seeing 83% saying yes.
Marvin: Then there was a followup question, I’m not sure if we can bring that up, is then where it is on the agenda. Do you do it at the start, at the end, or do you have both? There are actually some boards I know that have both.
Richard: I’m waiting to see if we’ve got this question lined up. No, we don’t have that one, so we’ll move on from there.
Marvin: Why don’t we lead with people? My preference is to have the standing meeting at the end. Why some people have it at the start, if a board meets infrequently, every six months, every three months, issue may have arisen over that period that you want to clear the air before the meeting begins. In fact, that’s then why some people even go to the point of having two places with a standing meeting. If you need it, you can have one at the beginning. If you need it, you can have one at the end. I want to repeat that, if you need it. Just because you have something on the agenda does not mean you use it, and when we would normally get to this on an agenda if I’m chairing the meeting, I would confirm do we need to have this meeting? If the answer is no, we just move right on along.
Richard: Great. You mentioned the pre-reading and the material prior to the meeting Typically as a director in your experience, it sounds like you receive the material, Marvin, about a week, two weeks before. What’s the minimum amount of time that all secretaries should really be getting that material to the board?
Marvin: I’m a big believer in two weeks, especially the longer the package, the more time people need to digest it. That also means two weeks without any interruptions. In other words, no walk on items, no version 2.2.3, did I not send that to you last night? You really want to get it out so people can digest it. The key item here, again, is much like the agenda. Do we understand what this item is doing on the agenda? Is there recommendations? Is it a yes no type decision, either we do it or we don’t? Or can we put it off? Is there any consequence if we delay it for some period of time? People need to understand what the implications of these items are. We used to do it with paper. The two weeks gave us some time for shipping. Today, electronically, you push the button it arrives milliseconds later, but that doesn’t mean you give people less time. You still need to give them that two weeks to really digest things.
Richard: Coming to another poll question here, but I think that answer could the CFO a bit of a headache. Given that two week period prior to the meeting, finance reports could have changed by then, there could be updated numbers. If there are changes, how should finance deal with that?
Marvin: Sure. I will give you two different versions of that. First, by having a planning calendar, the CFO knows the dates of the meetings, knows the dates by which it needs to be gathered. My experience has been they normally can accommodate it. To your point, if something has happened, something at the last minute, maybe the government has just released a budget and they’ve changed some rules or something, as soon as possible. As soon as you can, get it to the board. If it truly is that you can only get it to them 24 hours in advance, then the question I would ask the chairman of the board is, what is the consequence if we hold this off? Maybe we need to have a special meeting just to talk about this, or can it wait until the next meeting? People really do not like, especially with a long item, dropped in at the last minute. Probably a week at the minimum, you really, really should not get in the habit of walking things on with a days notice.
Richard: Thanks for that, Marvin. Next poll question here that we’re going to open up, how far in advance do you typically send out materials to your board?
Marvin: While we’re waiting, I’m hoping the answer won’t be day of the meeting.
Richard: I’m pleased to report zero respondents saying day of the meeting. About 77%, 78% saying one week in advance of the meeting. 10% saying three to five days in advance, and my guess would be last minute changes, late material is probably the reason for that. 7% saying two weeks or more in advance.
Marvin: I think with the one week in advance, those two answers may be the same because it may be three to five business day but maybe with a calendar, you can have a week with a calendar but that only represents three to five business days. Certainly, no less than that would make any sense to me.
Richard: Great. Okay, looking at the time here we’ve got five minutes to 2:30 so we’ll keep this swiftly moving. Next thing we wanted to talk about was meeting minutes.
Marvin: I think what’s important here is that if you have a board secretary who happens to be a lawyer, they would like you to have very basic minutes that say the item was moved, it was approved. The item was moved, then it was approved. If they work in government, they tend to do the [inaudible 00:23:37] approach, where you have a verbatim transcript of the meeting. What we would like to encourage people is something in the middle. Every set of minutes that the board has can be audited, it can be called by the court, and when the court does that what they’re interested in is, did the board exercise diligence? Did it exercise care? If you’ve talked about an item for 30 minutes, there’s got to be more than just here’s the motion and it was approved. There should be a little summary of the discussion, in essence, to show the diligence of the board.
Obviously, some items are two minute items, perhaps just the motion and being approved is all you need. On a longer, more strategic item, did the board take diligence? I share this with you, there have been court cases where the court has subpoenaed the minutes, looked at them, and said, I don’t see how this board could have exercised any diligence at all. The board members say you don’t understand, your honor, we talked about this for an hour, and he says, but your minutes have two lines in there. How did you actually represent that? That’s what you need. A performance tip on the right, this middle ground approach.
Also another key performance tip is board members should not keep and retain notes. There cannot be two different sets of what happened at the minutes. Again, a middle ground approach there is board members might keep notes until such time as draft minutes are released. Once they are sure the draft minutes capture the points they need, they would destroy their notes. Thus, the last point we give you, draft minutes really need to be circulated within roughly a week of the meeting and that minimizes the chances of those notes being kept, and having other records of what that meeting was all about.
Richard: Marvin, any other implications for directors keeping notes, besides two versions of what happened? Any discoverability concerns?
Marvin: Yeah, that all falls into that. The minute you’ve got different sets of notes and people find about it, lawyers can ask to see them, then judges are in interesting positions. In your note it says so and so fell asleep, and over here we’ve got … You really only need to have one set of minutes for the meeting. They’ve got to be the official, there can’t be any other notes out there. Even the chair [crosstalk 00:25:45].
Richard: Yeah, I agree with that. In camera meetings, and how those are different.
Marvin: Clearly, in camera meetings are held to handle sensitive issues. I say that to you, too often I have seen boards once management gets up and leaves, then they get into this informal discussion, hey, how was your holidays, what are the grandkids doing? The next thing you know, you’ve spent 20 minutes in camera. Every minute you spend in camera, management is sitting outside the room are wondering, what are they talking about? What are they talking about? You really need to keep it focused. There is a sample list of things you might talk about. Some internal problems of the board, the CEO’s employment status or contract for remuneration, if there’s been approaches from third parties, some certain government policies, union matters, personnel matters, but you really need to stay focused.
Also, when the meeting comes to an end, the chair has to be empowered to share something about what happened with management. They’re sitting there wondering what happened. If we’ve been talking for 20 minutes, the door is open, the CEO of the organization comes in and says, “So, Marvin, what’d you talk about?” and I go, “Oh, nothing very much,” it’s not going to seem realistic you spent 20 minutes talking about nothing very much.
In the bottom right corner of that slide is also a note about minutes. Some people believe that in camera minutes somehow are special, that they can’t be subpoenaed and that’s not true. Generally speaking, what happens in an in camera session itself is not minuted. When you come out of in camera, you go back into an open session. If there are motions, you can put a motion then publicly and vote on it then, and there an be a short summary of what was discussed, but there are no minutes kept in an in camera session.
Richard: Okay, let’s move to board portals. That’s our business. What are top two benefits in your experience of using a board portal, Marvin?
Marvin: Well, we’ve got them listed in there. One is having this wonderful repository of information, so that all the past minutes, past annual reports, marketing research studies, all of this are kept in one key place. That makes being a board member so easy, because I can refer back and help make my educated opinion. Clearly the other big benefit is for the corporate secretary, him or herself, that you’re not burning all that paper. You don’t have to do all that printing, you don’t have all the courier charges or whatever other mean you use. It really allows the board to be socially conscious in what its doing. Having said that to you, there’s a couple of risks.
One is with all those people sitting with computers in front of them, they really have to stay focused on the board agenda. The temptation to open up a window and do email or play a game, I’ve even seen at some meetings board members having side conversations electronically that they do not have publicly. I’ve always said there can only be one speaker. One of the dangers with all that computer technology is you get those side comments. Today, we have to be aware as, again, last night with the debate, with Hillary and Donald, about hacking and all this stuff going on with hacking, so security with the portal. If you’re going to have this wonderful repository for the board, you’ve also got to really, really make sure that it’s secure.
Richard: Definitely. I’ll add onto that, security is definitely the core business of a board portal provider. They should be monitoring and doing continuous testing on the service. Everything should be encrypted on the server, in transit when board members are downloading it to their device, on their device as well. Any organization [inaudible 00:29:22] when you’re on the board, certainly big efficiency improvements to star. As Marvin said, you’ve got everything in one place. Not just board and committee information, you’ve got policies, press releases, financials, past minutes, you can complete surveys in the same place, vote on [inaudible 00:29:42] on the road.
Those are definitely some of the big things that get used heavily by our clients. The ability to just go back and search previous meeting material, you find just really helps to keep the discussion moving where that topic isn’t getting put on hold or put on the agenda for the next meeting to be picked up again, until something from a previous meeting has been referenced. To be able to find that information and have it at your fingertips keeps that meeting moving, keeps the discussion flowing.
Marvin: One downside, again, that I just quickly noticed, sometimes people believe since we’ve got this portal, I can update the report that I sent to the board. I know I sent it to you two weeks ago, but last night at midnight I posted a new version. Again, you can’t fall into that trap. Electronically, it’s easily done but you have to treat it like it’s paper. Would a board member reasonably have time to review the new version of the report? Although the technology enables it, you’ve got to have that practice, if you will, that diligence, to not fall into that trap.
Richard: Yeah, I agree with that. I think we talked about it the other day, that no one should be showing up at the meeting and reading something new for the first time.
Richard: Okay, so I think we’ve done pretty well here. We’re at 2:33 eastern. For anyone interested in taking a look at the Diligent portal, seeing if it might be something that’s easy to use, definitely the paper look and feel is particularly popular. Certainly in Canada, it’s seen as cyber security risk management, corporate government’s best practice, over 615 clients using it. That’s a mix, public boards, crown corporations, nonprofits. If anyone would like more information, see a quick demo, my email is on the screen, jot it down. We’ve come to the end of the presentation, so what I’d like to do is just see if we have any outstanding questions here. Right now, I’m not seeing any that we haven’t already answered, so I think we are good to end today’s webinar. Any final thoughts?
Marvin: Well, just as you’re looking at that last page, obviously you are Richard Harrison. I’m not Paul Forgues, but Paul is the managing director to the Directors College. Just like you can contact Richard for more information about the Diligent portal, Paul would be happy to share some information about the Directors College program. You do five modules, the last of which is a very behavioral simulation model where we simulate some meetings and we give people feedback. There’s a challenge test at the exam, and people can get a chartered director designation. We have many corporations that are putting all of their board members through this program, and we’ve been very pleased to do this, and have been doing it for 14 years. He can answer your questions that way. I teach at the university, I’m easily found. If you’ve got any followup questions, I’d be happy to answer an email directed at me, just MRyder@McMasterUniversity, otherwise it’s been a pleasure to share this with you today.
Richard: Thanks very much, Marvin, on behalf of everyone at Diligent. I’m sure I can speak for everyone on the phone, thanks so much for sharing your insight with us today. I think everyone has found it particularly insightful, and I think we’ll be doing another one of these soon.
Marvin: Thank you.
Richard: Thanks everyone, have a great afternoon.