By James Beck
While topics such as meeting procedures, agenda preparation, board paper preparation and minute taking may seem minor issues, as the following quote from the UK Financial Reporting Council (2011, s. 3.1) explains – and is highlighted in recent court cases such as the James Hardie and Centro decisions – effective board decision making does not happen without good policies and processes:
Well-informed and high-quality decision making is a critical requirement for a board to be effective and does not happen by accident. Flawed decisions can be made with the best of intentions, with competent individuals believing passionately that they are making a sound judgment, when they are not. Many of the factors which lead to poor decision making are predictable and preventable. Boards can minimise the risk of poor decisions by investing time in the design of their decision?making policies and processes, including the contribution of committees.
Ensuring optimal efficiency in board processes allows for greater contribution from directors, reduces the workload and time demands placed upon them and fosters an engaged culture in the boardroom. As such, how would your board answer the following questions:
- Does the board charter or manual set out details of the board’s meeting processes?
- Has the board established ground rules for meeting behaviours?
- Does the chair encourage directors to actively participate in meetings?
- Is the meeting agenda logically structured to ensure matters for decision are dealt with early in the meeting?
- Does the meeting agenda allow adequate time for discussion at board meetings, as well as for information giving?
- Is the board pack delivered at least 7 days prior to board meetings?
- Do the board papers follow a standard format?
- Does the board regularly review the content and format of the board papers?
- Do the minutes of board meetings provide an accurate account of the board’s decision making which demonstrates the due care and diligence of the directors regarding the matters put before them?
- Are the minutes distributed to directors as soon as possible after a board meeting to confirm their accuracy and assure that any mistakes are promptly identified and corrected?
- Do the minutes describe and record all declared conflicts of interest?
- Are all action items from board meetings followed up or completed?
- Does the board have a comprehensive calendar setting out its annual activities?
- Does each board committee have a charter or terms of reference that clearly sets out its roles and responsibilities?
- Does the board regularly review its committee structure?
If the answer to a number of these questions is ‘no’, your board may need to conduct a review into its processes. For example, as discussed in Kiel, Nicholson, Tunny and Beck (2012), in reviewing the quality of the board papers consideration should be given to issues such as:
- the extent to which all papers are well written, covering the issues in a balanced manner;
- the provision of a succinct summary of the issue and recommendations, with more detailed material included in appendices;
- evidence that various options were considered and why the proposed course of action being put forward is seen as the best option; this will often be done through a formal risk assessment;
- the appropriateness of any discussion of the financial implications of the proposal, including worst and best case estimates; and
- demonstration as to how the recommendations are in accord with the agreed strategy.
Such a review can easily be incorporated into the board evaluation process or can be a standalone governance review. Improvements to board processes are among the easiest governance ailments to fix. For example, a revised agenda or board calendar is not difficult to develop given that there are many examples available online to provide guidance such as those on the Effective Governance website. To download any of the following documents, please view our Useful Governance Templates:
- Board Calendar Template
- Board Papers Template
- Committee Meeting Agenda Template
- Board Meeting Agenda with In Camera Session Template
- Meeting Minutes Template
- Strategic CEO Report Template
- Strategic Decision Making Template
Financial Reporting Council (FRC) 2011. Guidance on Board Effectiveness. London: Financial Reporting Council. Available: https://www.frc.org.uk/document-library/corporate-governance/2011/guidance-on-board-effectiveness.
Kiel, G., Nicholson, G., Tunny, J. A. & Beck, J. 2012. Directors at Work: A Practical Guide for Boards. Sydney: Thomson Reuters.