Should the Board meet alone?

In both the for-profit and the not-for-profit world there is a growing trend for boards to meet alone at the front end of board meetings. This is commonly known as ‘board only time’ and has its origin in the company world where CEOs, CFOs and COOs were also board members, i.e. executive directors. These individuals are frequently strong, dominant personalities who can override the independent or non-executive directors’ opinions and contributions. After the recent large-scale corporate meltdown it was deemed good practice for the non-executive directors to meet alone to achieve governance positions that were not tainted by the vested interests that executive directors carry.

The practice has continued and has been taken up in all sectors and found to be invaluable for knitting the board together before the board meeting.

Many boards use this time to enable directors to discuss the emphasis of the meeting to follow, to allocate time to agenda items or to address internal board matters such as conflict between board members that should not be addressed in front of employees. Directors also use this time to discuss their view of papers and reports, and to ask questions of each other that they might feel inhibited to ask in front of senior staff.

There might also be circumstances which might justify the exclusion of the chief executive where his or her presence may be inappropriate, inhibiting or embarrassing. Most commonly this would relate to the following:

• regular chief executive performance evaluation;
• ad hoc concerns about the chief executive’s conduct;
• chief executive remuneration;
• board performance evaluation;
• conflicts of interest involving either the chief executive or individual board members;
• concerns about the relationship between the board and the chief executive;
• scheduled meetings with the external auditor; and
• ad hoc meetings with board-commissioned independent reviewers of board or chief executive performance-related matters.

Not surprisingly, many chief executives resist the idea that a board should meet on its own.

Given the importance of the partnership between the board and the chief executive, a board should be aware of this natural anxiety. A board-only session should, as far as possible, be signalled in advance and be instituted in accordance with pre-established expectations. If a board-only session is routine it may be less threatening for the chief executive and less likely to signal that the board is plotting.

Views vary on the status of board-only sessions. Some authorities argue that these sessions should not make decisions, and should be essentially informal discussions subject to more formal procedure later, if required.

There are various ways sessions can be held informally. For example, some boards have off-site meetings over a meal before a formal meeting is held. Another option is to meet in the boardroom before the regular meeting is scheduled to begin.

On the other hand, topics for board-only consideration may justify, or even require, greater formality. If that is the case, the normal disciplines of notice, agenda, minutes, etc. should be observed. To retain confidentiality, if that is the purpose of the board-only session, minutes of such a discussion should be kept and confirmed in a further closed session. Having dealt with the matter, the board may consider ‘declassification’ by briefing interested parties who were not present or by reporting its deliberations more generally.

Such sessions should ideally be held before the board meeting proper gets under way. This allows appropriate action to follow during the ‘open’ meeting. It also avoids the inevitable awkwardness when the chief executive and others are asked to leave a meeting in progress.

Board-only sessions aren’t recommended when business-as-usual matters are under consideration. To exclude the chief executive and staff from these deliberations simply denies them the chance to do their job. Board-only sessions, handled poorly, can undermine vital relationships.

Using committees and working parties to help the board do its work

In addition to their prescheduled tasks, board committees and working parties can be used to assist the board to prepare for and carry out important discussion at the board meeting. It is not uncommon for a working party or an existing standing committee to be asked to carry out some initial thinking or research and to then bring this to the boardroom. Board meeting time is saved and the initial thinking could mean the full board discussion starts at a higher level, enabling a quicker outcome.

Board committees are discussed in the Governance Concepts section at the beginning of this resource.