An effective board meeting is a highly organized team effort potentially involving every department in a company, its management and the directors themselves. These meetings are critical to the company’s operation, and care must be taken to ensure they are as effective — and efficient — as possible.
Both public and private company boards of directors provide oversight and advise company management on strategy and operations.
Directors owe “fiduciary duties” to the company and its stockholders. Breaching these duties can result in personal liability to directors. To satisfy these duties, boards must follow a decision-making process that allows for considered deliberation and discussion of all matters before the board. Directors also must avoid conflicts of interest, and act in the best interest of the company and its stockholders.
Directors will have a hard time carrying out their fiduciary duties and providing effective advice and oversight if their board meetings are poorly run.
For most startups, the board of directors established at the time of incorporation is composed of just the founders or a subset of the founders. During this early stage, the directors handle most acts that require board approval by signing a written consent. However, the approval of complicated matters, and in particular matters that may implicate a director’s fiduciary duty of loyalty to the company (e.g., a transaction between the company and another entity a director controls) are better served with a live or tele-meeting to allow for careful deliberation and discussion.
After a startup’s first round of venture capital financing, the board composition is typically revised to include a mix of common and preferred stock directors (designated by the founders and investors, respectively), and often an independent director. At this point, the board adopts a more formal board meeting schedule and process, and running effective board meetings becomes more critical to the startup’s success and the directors’ protection.
Time, organization and information are the three keys to an effective meeting. As a successful board meeting is the result of coordinated teamwork across the organization, a company’s management’s involvement and attention is imperative. As a best practice, institute board meeting processes ahead of time. This advanced planning helps to avoid last-minute scrambles and incomplete or, worse, incorrect information going to the board for deliberation.
- Time. The board needs time to review and discuss the matters before it. Allow at least a week for the board to review materials before the board meeting. Not only does this help directors satisfy their fiduciary duties, but allows for informed follow-up questions or material requests to be made ahead of the meeting. This can help avoid last-minute delays if the board is unable to act on the information initially provided, which could be critical in a time-sensitive transaction or litigation matter.
- Organization. The best board meetings are highly organized — both in the weeks leading up to the meeting and in the conduct of the meeting itself.
- Work with the board’s chairperson or a lead director to agree upon a clear agenda ahead of time.
- Present and organize the information for the board using bound books or binders of hard copy materials indexed to the matters on the agenda. Companies are increasingly using iPads or other means of electronic access in lieu of, or to supplement, the paper versions of such materials. There are several board material management software vendors that can provide secure and seamless electronic access to, and organization of, the volumes of information sometimes necessary to send to the board.
- Keep on schedule while also building in adequate time for discussion.
- Be careful to avoid preventable surprises or confusion on the day of a board meeting.
- Information. The information sent to the board for their consideration and deliberation should be clearly presented and comprehensive.
- Executives and employees across the company should ensure all necessary information and materials are prepared and available for the board meeting.
- Management or relevant non-management employees should be on hand to answer any of the board’s questions.
- A specific person should be pre-appointed to take the meeting minutes, to record the process that ensued and decisions made. Failure to properly document the board’s deliberation and decisions can impede the board’s ability to demonstrate how the board satisfied its fiduciary duties, derailing what otherwise might be the best of processes. See 8 Things to Know About Board Meeting Minutes for board meeting minutes best practices.
The company’s lawyers may also be able to help direct the meeting or advise on the process leading up to and during the meeting.
Effective board meeting checklist
- Build a timeline that facilitates the provision of information and materials to the board at least a week ahead of the meeting.
- Consult with the board and management to develop a clear agenda for the meeting ahead of time (including any board committee break-out meetings and items).
- Include time for an executive session, and consider an outside directors’ session as well.
- Consider time zones — if directors or management are attending via conference call or video conference from multiple time zones, strive for a time to maximize convenience.
- Develop a clear process allowing for complete and correct quality-checked information to be delivered to the board the desired amount of time ahead of the meeting.
- Put someone in charge. Clear direction and coordination is crucial to a team effort of this importance and magnitude.
- Index the materials provided to the agenda items to facilitate an organized meeting.
- Consider providing the information in both paper form and electronic form through a secure vendor.
- Communicate effectively and clearly, and provide the board with access to management (and any relevant employees) before, during and after the meeting.
- Stay on schedule but allow for adequate time for discussion and questions.
- Appoint a specific person in advance to write meeting minutes, to ensure that a complete and clear record is taken of the meeting, including decisions made and the process that led to them. Ensure the company’s attorney reviews and updates this record as necessary.