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How a board works

Once your board is established it’s time to decide how your board operates. Consider how often you will meet, what board papers will look like and how you’ll plan the board’s workload.

Board meetings

While the degree of formality may differ between organisations, the general format of a meeting is often very similar whether you are an start-up or an NZX-listed company. Meetings are usually held once a month, although this depends on the issues facing the organisation and may increase or decrease as a result.

If you’re just getting started with a board it’s worth introducing a certain amount of formality right from the beginning such as setting an agenda and recording outcomes. Time is precious and well managed meetings will make sure you get the most from your board.

What makes a good meeting?

A strong culture lies at the heart of conducting an efficient and effective board meeting. This begins with a firm but fair chair and includes respectful and contributing directors. The best meetings are where every member feels comfortable in contributing their views and is respected for those views no matter how divergent they may be. Open debate will help the board make the best decision for the organisation to move forward.

Preparing for a meeting

Because a board often only has a small window of opportunity each month to meet and make important decisions, it is vital that every director turns up well prepared and up-to-date on the issues at hand. Appropriate notice of meeting times, location, agenda, and necessary briefing papers should be given to directors to ensure everyone comes prepared.

The meeting

Agenda

The agenda plays a vital role in guiding and structuring the meeting. It’s important to cover the important issues first (while everyone is still energised) and giving the appropriate amount of time to issues based on their level of importance.

Duration

The length of a meeting will obviously depend on what issues need to be dealt with but on average a meeting can last up to around four-five hours.

Quorum

A company’s constitution will often state that a board meeting must have a quorum in order to proceed. This usually means a simple majority, unless the constitution has its own specific requirements (ie a 75 per cent majority perhaps).

Minutes

The minutes of a meeting are an important part of ensuring good process and accountability and in order to record actions to be taken. They are a valuable tool for boards to refer back to and keep track of progress being made. Minutes need only be brief (not verbatim) and before they are distributed to the board, the chair should have the chance to edit where appropriate to ensure accuracy. Minutes are also valuable in that they can be used to protect directors against accusations of bad practice.

Location

The location of the meeting depends on whether the organisation operates nationwide or is city specific. Some meeting locations are always the same, while some may move around the country. Most often however, the meeting takes place at the headquarters of the organisation. Organisations may also videoconferencing technology to cut down on the costs and minimise environmental impacts.

Board papers

Board papers play an important role in stimulating discussion and keeping directors informed of current issues facing your business. The point is often to identify and understand important issues related to the future of the organisation so that good decisions can be made.

There is no one-size-fits-all way of producing a board paper and it is therefore best if each board decides for itself how the preparation, format and content of papers should be presented. Certain basic papers are generally accepted as being necessary:

  • minutes of previous meeting
  • CEO's operational report
  • financial report
  • regular disclosure of interests register
  • other papers produced by management.

Keep in mind that a paper should be brief, digestible, and with sufficient detail and data to ensure its full potential is reached.

A paper should state at the beginning whether its purpose is:

  • for information only
  • for discussion
  • for a decision to be taken.

A paper should focus on strategic issues and be signed off by the CEO before being circulated to the board. Also ensure that sufficient time is given to directors to absorb the paper prior to attending the meeting so that they can be prepared to discuss and debate it.

If the outcomes of a board paper have any budget implications, these should be clearly laid out for the board to consider.

Board papers should be distributed at least a week before the meeting to give board members ample time to read thoroughly.

Confidentiality and security

Board papers often contain sensitive information about an organisation and directors should therefore take care to ensure they are kept secure.

Planning the workload

A useful tool for board effectiveness is an annual work plan which provides directors with an outline of the year ahead. A work plan lets directors know what their commitments for the year will be and ensures adequate attention is given to various board functions which might otherwise be deferred or overlooked.

Expectations

The chair is expected to initiate the work plan in collaboration with the CEO and company secretary.

What should a work plan include?

The board’s work plan might include:

  • meeting dates for the year, including their locations
  • matters to be considered at each meeting
  • approval of periodic, quarterly and half yearly accounts, reports to shareholders and public announcements
  • reviews of actual vs planned performance
  • receipt of certificates of compliance from management
  • CEO performance and remuneration review
  • full review of operating environment
  • review of the strategic plan, business plan and mission statement
  • approval of the annual budget and annual report
  • declaration of recommendation of dividends
  • review of audit requirements
  • review of board committee terms of reference
  • board and individual director evaluations
  • review of directors’ remuneration
  • review of remuneration policies and practices in general including superannuation and share purchase plans
  • review of risk assessment policies and controls and compliance
  • review of shareholder, customer and supplier relations
  • dates and nature management presentations during the year and the personnel involved
  • particulars of guests invited to meetings during the year
  • details of any retreats and functions
  • contact details of staff who distribute board papers, arrange travel, deal with director fees and expenses, and are secretarial staff for senior management.

Adapted from the Governance Essentials' course resource kit.

How an advisory board operates

Advisory boards are often less formal than a board of directors. But whether your advisory board meets in a formal or casual style the important differentiator is that an advisory board only provides recommendations. It cannot instruct you to take actions. As the business owner, or business’s representative, you must have absolute discretion to accept or disregard any recommendations made by your advisory board. Advisory board members must not be unwittingly exposed to liability as full directors. This should be reflected in terms of engagement and any documentation of meetings. Otherwise, the law could interpret that your advisory board members to be deemed directors.

Each advisory board will adopt a style for meetings that suits. Some will have similar formality to a board of directors while for others meetings are more like workshops that involve collective problem solving and brainstorming.

An advisory board may have a work plan to address how it will achieve its goals over a defined period. A work plan provides focus for the advisory board and helps minimise opportunities for receiving advice outside of the scope of the plan. The work plan should be reviewed on a regular basis to confirm its ongoing relevance.

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