6.8 Less Minutes Equals Less Mischief

The exhausting marathon Board meeting (is there any other kind?) is over and the CFO/Corporate Secretary confronts pages of notes from the discussions. He has to turn these into a professional set of minutes that exude credibility and demonstrate that the Board has been diligent in exercising its fiduciary duty.

He might be tempted to render a full account of the discussion on each topic the Board reviewed to indicate that the Directors considered the issues in depth, weighed the alternatives and rendered a decision that reasonably balanced the pros and cons of the issue. It is, after all, the requirement of directors to examine the issues, ask questions and bring prudent judgement to bear. Perhaps the minutes should fully document their deliberations?

Typical practice suggests not, as there are several problems with complete disclosure. Auditors, shareholders, potential financiers, acquisitors and others all have access to the minutes. A few may read the minutes because they have axes to grind with the company or its management and directors. A revelation that the Board considered a course of action, even if it was not adopted, might be sufficient to make mischief. In other cases, potential acquisitors may learn something of the company’s strategy that they otherwise wouldn’t, and non-disclosures notwithstanding, gain some advantage from the revelation.

For these reasons, companies typically include only the bare bones of the discussion in the minutes. In this approach, the minutes indicate the nature of the issue, that a “brief” or “full” discussion ensued, and any motion that was adopted as a result of the discussion. For example, the Board might have a vigorous discussion about a matter of company policy, with different and conflicting viewpoints articulated. Eventually the Board might come to a decision and adopt a course of action. The minutes would read:

“The Board reviewed the company policy with respect to x. A full discussion ensued. ON MOTION DULY MADE, SECONDED AND CARRIED, IT WAS RESOLVED THAT the following course of action be adopted: xxx ”.

 

 Competitors and suitors can’t learn much from that disclosure. At the same time, the minutes indicate that the Directors exercised their fiduciary duty in the full discussion and the decision taken.

Notwithstanding the brevity, Directors can always request that certain comments be reflected in the minutes. This is especially applicable if they disagree with a decision and don’t want to be liable for its consequences.

In sum, corporate secretaries should keep the minutes brief and to the point. The Board can demonstrate the exercise of its responsibilities even with brief disclosure, and the company can minimize the opportunity for mischief.

This article first appeared in the Fall 2011 edition of The Hire Standard – the newsletter of Corporate Recruiters, British Columbia’s leading recruiters of high technology talent.