Board Meeting Procedures

Transcription

1 Board Meeting Procedures Tuesday, September 24, 2013, 1:00 p.m. Kevin Kinross Of Counsel Bricker & Eckler, LLP Columbus, Ohio Kevin Kinross in an attorney with Bricker & Eckler LLP, practicing in its Business, Tax & Estates and Counsel for Boards & Executives practice groups and a governance consultant with INCompliance Consulting. In this capacity, he serves as counsel to and consults with boards, publicly and privately held companies, mutual insurance companies, and tax-exempt entities focusing on: Governing board and executive officer governance and control; Governing board structure and organization; Corporate structure and organization; Insurance regulatory matters; Mergers and acquisitions; Board evaluations; Board succession planning; Reporting and disclosing of defects of internal controls, violations of law, breaches of fiduciary duty, and illegal activities; Public reporting and disclosure responsibilities; and D&O insurance, indemnification, and other protection against board and executive liability. Kevin also regularly assists clients with audits of governance practices and board training. He is the coeditor of the Acredula newsletter and editor of the Acredula Corporate Governance Blog, both of which provide information of interest to governing boards and executive officers. Kevin has been recognized by SuperLawyers magazine as a Rising Star in Corporate Governance since 2010 and has authored numerous articles on corporate governance topics for Acredula, The Corporate Board, Mid-West In house, Lexis Nexus Corporate Governance Report, and Law 360 as well as other publications and periodicals.

2 Board Meeting Procedures September 22, 2013 Seattle, WA NAMIC Annual Convention Kevin M. Kinross 614) Counsel for BOARDS AND EXECUTIVES A Bricker & Eckler Practice Group Bricker & Eckler LLP (614) South Third Street Columbus, OH Columbus Cleveland Cincinnati-Dayton Marietta 2013 NAMIC Annual Convention - Kinross Page 1 of 17

3 Overview of Presentation Preparation of Meeting Distribution of Materials/Director Preparation for Meetings Participating/Conduct in the Meeting Post Meeting: Now what should happen? 3 Remember Because governance of an organization is the aggregate of many things, including its culture, what may be appropriate in terms of governance of one organization may not be appropriate for another Every organization should design a board structure/practices that best suit its need, profile and culture NAMIC Annual Convention - Kinross Page 2 of 17

4 The Goal of an Organization s Governance Structure Every organization s board structures and practices should, among other things, Facilitate the board s discharge of its fiduciary duties and the board s role to provide direction and oversight of the organization s operations and monitor the legal and other risks to the organization Encourage candid and open discussion and deliberation Support thorough, careful and independent review, analysis and decision-making 5 Preparation for Board Meeting Preparation of the Agenda: Whose Role? NAMIC Annual Convention - Kinross Page 3 of 17

5 Preparation for Board Meeting Preparation of Board Book/Materials: Whose Role? 7 Preparation for Board Meeting Distribution of Materials: Hard copy (via mail) Electronic Copy (via ) Board Portals NAMIC Annual Convention - Kinross Page 4 of 17

6 Preparation of Board Materials Issues with traditional delivery (hard copy/ ) methods: Locating Directors for delivery (travel schedules) Inconvenience in traveling with/carrying large packet of materials Cost of delivery Unsecured delivery of sensitive materials Sensitive materials are stored on unsecured PC What do directors do with materials postmeeting? 9 Preparation of Board Materials What is a Board Portal? A board portal is a secure website where directors can access board materials and other sensitive documents Solution that replaces the expensive process of paper distributions Single location where one copy of the board book can be stored and updated Secure site which allows for multiple layers of access: director, committee members, officers NAMIC Annual Convention - Kinross Page 5 of 17

7 Preparation of Board Materials What is a Board Portal (continued) Allows board members to communicate collectively before meetings (and even in some instances take action through it) 11 Preparation of Board Materials Key advantages: Adherence to retention policies Immediate communication Cost savings (from copying/mail, staff time) Able to review/prepare anywhere in the world More secure NAMIC Annual Convention - Kinross Page 6 of 17

8 Preparing for the Meeting Regardless of how the materials are distributed Directors NEED to review the materials and think about questions before the meeting Remember your fiduciary duty of care: to act as an ordinarily reasonable prudent person would in a like or similar circumstances 13 Preparing for the Meeting How to comply with your fiduciary duties: Attend meetings Ask questions Preparing for meeting ahead of time will increase effectiveness and efficiency: including allow for the use of consent agenda NAMIC Annual Convention - Kinross Page 7 of 17

9 Preparing for the Meeting All directors must be aware of key matters under the corporate statutes of your jurisdiction, the company s articles or certificate of incorporation, the company s bylaws or code of regulations, and other governing documents For example: Calling the meeting Convening the meeting 15 Calling the Meeting Who has the authority to call a meeting (regular v. special meetings) When / How is distribution of notice required Notice must be given to all directors NOT just those that you know will vote in favor of an action (even if that number is greater than a majority) Notice can be waived NAMIC Annual Convention - Kinross Page 8 of 17

10 Convening the Meeting 17 Quorum It is important to remember that --a board acts only by the majority decision of its members present at a meeting in which quorum is present AND that a board acts as ONE. Non-voting members are not counted in determining quorum Presence of independent directors Voting requirements Board observers/other participants Board Observers/Other Participants Typical attendees: Directors Corporate Secretary Executive Officers Advisors: Legal Counsel Financial Advisors Remember the right of reliance NAMIC Annual Convention - Kinross Page 9 of 17

11 Board Observers/Other Participants State corporation law expects, and gives protection for, directors reliance on Officers or employees of the organization as to matters for which they are reasonably believed to be reliable and competent Legal counsel, public accountants, or other professionals as to matters reasonably believed to be within their professional competence Committees as to matters within their designated authority, and that the director reasonably believes to merit confidence 19 Conduct at the Meeting Meeting protocol Chair of the meeting/what is the Chair s role Making motions Attendance in person; remote attendance Issues to consider NAMIC Annual Convention - Kinross Page 10 of 17

12 Conduct at the Meeting Utilizing a Consent Agenda Utilizing Executive Session 21 Conduct at the Meeting Utilizing a Consent Agenda? Often Board s complain that the meetings waste precious minutes on routing matters and are left with little or no time to discuss the strategic issues facing an organization Consent Agendas can streamline the process. So what actually is a consent agenda? A consent agenda is a tool that groups together routine items and resolutions under one agenda item. Items included in the consent agenda require no discussion before voting and all are approved in one vote. Consent agendas typically include: Minutes from a previous board meeting Factual reports Committee reports Minor operational changes Routine document updates NAMIC Annual Convention - Kinross Page 11 of 17

13 Conduct at the Meeting The use of a consent agenda can help focus the attention and minds of Directors on the matters that mean the most to the organization. When properly applied, and understood, a consent agenda can improve and handle non-controversial business matters that the board needs to address quickly, which preserves valuable time for the directors to focus on strategic issues. 23 Conduct at the Meeting Utilizing Executive Session refers to the portion of the board meeting where any attending observers, invitees, management and management directors are excused, and the remaining non-management directors discuss matters which they prefer to discuss outside of the presence of management attendees NAMIC Annual Convention - Kinross Page 12 of 17

14 Conduct at the Meeting Utilizing Executive Session (continued) Discussion can and does range from privileged communications with legal counsel to personnel matters involving management (including management competency issues, succession planning, compensation issues, and a wide variety of other issues) to any number of matters for which the outside board members desire to undertake open and frank discussion without the presence (and potential influence) of management 25 Conduct at the Meeting Utilizing Executive Session (continued) No votes take place in Executive Session. In addition to the technical need to assure that actual voting on matters takes place in a forum involving opportunity for participation by all directors, care must be taken to avoid decision-making in executive sessions. Decision-making and formal voting should only take place in the full board setting either once the meeting is re-adjourned or in subsequent full board meetings NAMIC Annual Convention - Kinross Page 13 of 17

15 Conduct at the Meeting Be sure to follow the proper procedures when utilizing executive session (especially in the case of entering executive session to engage in privileged legal discussion with counsel) A board member must make a motion to go into executive session and the motion must be approved by a majority of those directors present in person or by electronic means 27 Conduct at the Meeting The minutes should reflect that a motion was made and approved to go into executive session to discuss. Minutes should not be taken while in executive session Exceptions Minutes should also reflect which board members, if any, or invitees left the room when the board went into executive session NAMIC Annual Convention - Kinross Page 14 of 17

16 Conduct of the Meeting Dealing with conflicts: Understanding conflicts Duty to act in the best interests of the organization Types of Conflicts: Financial: most common Non-Financial/Conflicts outside of the boardroom: interactions with third parties (i.e. policyholders, regulators, media) 29 Conduct of the Meeting Taking and retaining notes Directors should feel free to take notes if it is their practice to do so, but they should ensure that their notes are accurate, complete and not capable of misinterpretation Directors should not feel compelled to take notes, since the minutes will serve as the official record of the actions that occurred at the meeting NAMIC Annual Convention - Kinross Page 15 of 17

17 Conduct of the Meeting Taking and Retaining Notes Write at the top Dear Mr/Mrs. Plaintiff s lawyer Never record meetings-if your current practice is to record the meeting solely to assist the secretary in the preparation of minutes be sure to implement a policy that such recordings will be destroyed immediately after the minutes are approved. 31 Post-meeting Conduct Minutes: Less IS More Minutes should not be a blow-by blow account or transcript of the meeting Minutes DO NOT need: Names of directors making a motion Names of directors that second a motions Names of directors making points/statements Names of directors that voted for an action (you can request the minutes reflect you voted no) The numbers of directors that voted for an action NAMIC Annual Convention - Kinross Page 16 of 17

18 Final Thoughts and Questions Kevin M. Kinross 614) Counsel for BOARDS AND EXECUTIVES A Bricker & Eckler Practice Group Bricker & Eckler LLP (614) South Third Street Columbus, OH Columbus Cleveland Cincinnati-Dayton Marietta 2013 NAMIC Annual Convention - Kinross Page 17 of 17