What is a board of directors meeting?
How do you run a meeting of the board?
What are the rules, procedures and board meeting requirements?
We have the ultimate guide to help you fully understand the board of directors’ meetings.
We will look at what is the purpose of the meeting of the board, why it’s important, how it is composed, how to conduct a board meeting, what happens at a meeting, quorum and even provide you with a sample of board of directors meeting minutes.
By the time you are done reading this article, you’ll know all there is to know about board meetings.
Are you ready to get started?
Let’s get right to it.
Board of directors meeting
Definition
The board of directors meeting is a meeting of the board members of a company at a regular interval to discuss strategic business decisions, company policies and important issues affecting the organization.
The company board members are the individuals composing the board of directors and required to be present at board meetings.
According to Investopedia, the board of directors is defined as follows:
“A board of directors (B of D) is an elected group of individuals that represent shareholders. The board is a governing body that typically meets at regular intervals to set policies for corporate management and oversight. Every public company must have a board of directors. Some private and nonprofit organizations also have a board of directors.”
Purpose
An important question is what is the purpose of a board of directors meeting?
The purpose of the board meeting is to:
- Discuss strategic decisions impacting the company
- Deal with important company policies
- Decide on how to deal with difficult issues
- Major decisions affecting the company’s future
- Review the company’s past performance
- Decide on the company’s roadmap
- Approves major plans of action
The board of directors spearhead a company’s strategic direction, assess the company’s performance and define the future plans of the company.
Composition
The board of directors meeting is composed of individuals mandated to provide strategic guidance to the company.
The board members can be company directors or can also be external to the company.
Often, the company’s board of directors are internal directors of the company as well.
For larger organizations, it is common to see non-executive directors or independent board members.
Generally, board members have different but complementary skills.
For example, you can have a board member who is an accountant, another one who may be an attorney, marketing specialist and so on.
A successful company is one who is able to unite experienced and savvy individuals helping it navigate the competitive markets and complex industries.
Importance
Board meetings are quite important as the company’s board of directors evaluates the company’s overall effectiveness and key performance indicators.
The board of directors acts as the captain to a ship.
When the board is composed of experienced individuals with complementary skills and abilities, they can collectively make important decisions while protecting the company’s interests.
The board is responsible to define a company’s objectives, targets and an overall plan to achieve that goal.
The decisions of the board are then implemented by company officers who then report back as to the status of their advancement, opportunities and challenges.
What happens in a board of directors meeting?
Company executives and officers generally prepare reports on the company’s operations, their key performance indicators, their successes and challenges.
These reports are submitted to the board members so they can evaluate what is working, what needs further development or what is not working as anticipated and needs more immediate attention.
The board will get reports relating to all major aspects of the business such as:
- Sales figures and finance
- Company expenditures
- Research and development and roadmap
- Compliance risk
- Customer acquisition channels
- Marketing operations
- General operations and management
- Human resources and productivity
- Expansion or retraction efforts
- Reorganization or restructuring efforts
- Profit distribution
- Downsizing of workforce
- Selection and replacement of corporate executives
- Company markets
During the board meeting, the directors discuss the company’s operations and reports submitted to them and make decisions as to how to move forward.
These decisions are known as resolutions of the board.
Who can call a meeting of the board of directors?
Any member of the board can call a meeting.
Typically, the board of directors meets at a regular interval such as monthly, quarterly or yearly.
However, if there is a specific issue or urgency, any member of the board can call for a special meeting or an unplanned meeting.
In that case, the corporate secretary will send a notice of board meeting to call the meeting.
How often do the board of directors meet?
An organization’s board of directors will function efficiently when the board members meet at a regular interval.
In many smaller organizations, startups or VC-backed companies, they may decide to hold a board meeting on a monthly basis for the board members to have a deeper understanding of how things are evolving.
For mature and large organizations, they may hold the meetings on a quarterly basis as the company’s quarterly reports are available for the board members to consult at the same time.
In certain cases, due to a specific need or urgency, the board of directors may meet out of schedule.
How do you prepare a board of directors meeting?
Properly preparing for board meetings is important for all stakeholders.
When board members attend a meeting, it will be useful to review the reports and material before attending the meeting.
This way, they are ready to have a meaningful conversation about the business at the meeting.
At a meeting, it’s as important to discuss content and material that has already been shared with the other members so everyone can formulate an opinion and are not surprised at the meeting with something new.
Remember, every board member is responsible for the decision of the board.
As a result, you do not want to surprise other board members with material and content they did not have a chance to digest and evaluate.
How to conduct a board meeting as president?
The board meeting is a time and place where the company’s chief executive officer or present should present the company’s story.
As the company’s president, you should have a good and solid command of where the company is and where it is heading.
You should have a good understanding of the consequences, positive or negative, of implementing past decisions of the board or policies.
At the end of the day, as the company’s president, you must present the company’s narrative to the board members so they can help guide and navigate the ship with you.
Every company is faced with opportunities and must deal with challenges.
As the president, it’s important that you come to the board of directors meeting knowing what are those risks and opportunities and, most importantly, what is your take on them.
What type of decisions are made by the board of directors?
The board of directors has an overall mandate to:
- Ensure the company defines its targets
- Takes measures to achieve its goals
- Assesses the overall success of the company
- Plan for the future.
To this effect, an organization’s board will decide on short-term, medium-term and long-term strategic decisions of the company.
When the board decides on a long-term strategy or vision, they will then define and help the organization implement short-term and medium-term plans in order to achieve the overall corporate objective.
For example, a short-term strategy is how to improve overall employee productivity.
The board can also provide guidance to the organization on how to restructure the business to turn things around.
Board meeting roles and responsibilities
Board chair responsibilities
The chairman of the board is the leader of the meeting.
As the leader, the chairman should have the experience to allow board members to share their views, handle contentious meetings and give an equal opportunity to all to share feedback even when opinions are conflicting.
The chairperson or a board member of experience should ensure the meeting stays on point and within the specified time limits.
In addition to facilitating and guiding the meetings, the chairman of the board is the one responsible to ensure there is a proper quorum for the meeting to be held.
Executive director responsibilities
An executive director is a person who is tasked by the board of directors to carry out its decisions.
When the board adopts a resolution, the executive director is responsible to ensure the decision is carried out in the organization whether he or she fully agrees with the decision or not.
The executive director is a member of the board but also an employee of the company.
It’s not an easy task but that’s what a company’s CEO is expected to do.
It does happen that in some cases, a company’s executive director clashes with board directors or chairman.
The executive director is ultimately held accountable to successfully implement the strategic decisions of the board.
Non-executive director responsibilities
A non-executive director has the same roles and responsibilities as an executive director of a company with the only exception that he or she is not employed by the company.
In other words, whether you are an executive member or non-executive member, you are responsible along with the other directors to help the company move forward and take advantage of opportunities and mitigate risks.
A non-executive member of the board will have the same legal duties and personal liability as an executive member of the board.
A non-executive board member can bring great insight and outside perspective to the company as they are not actively involved in the day-to-day operations of the company.
Board member responsibilities
As a group, the board members are responsible to guide a company and provide strategic advice to the organization.
The board members collectively decide on the company’s mission and future roadmap of the company.
They assess the company’s performance, assess how past decisions have been implemented and define short-term and long-term policies for the company.
Corporate secretary responsibilities
The corporate secretary is the person in charge of planning, preparing and document the board meetings.
In many large organizations, the corporate secretary is an attorney tasked to ensure the meeting minutes are faithfully kept and the decisions are adequately documented with proper resolutions.
The corporate secretary will have the following functions as it relates to the operations of the board:
- Notification of the meeting
- Scheduling the meeting
- Prepare the meeting agenda
- Keeping minutes of the meeting
- Gathering the presentations
- Documenting the meeting
- Drafting meeting resolutions
The corporate secretary can be required to handle more than the list outlined above as required by the company rules, articles, bylaws or the board itself.
How to run a board of directors meeting?
An efficient board of directors can help a company grow and penetrate new markets or increase profitability and sales.
Although it sounds simple, it may not be as straightforward as it may sound.
So, how to run a board meeting?
The board meetings should follow the rules of the company, bylaws and articles but also be managed in an efficient manner to avoid board dysfunction.
Meeting requirements
Companies are required to have a board of directors.
When a company has more than one member of the board, it must hold regular meetings to ensure the board has proper oversight and management and operations.
Very often, the board meeting requirements are outlined in the company’s bylaws or articles of incorporation.
The board of directors can also adopt governing rules and policies designed to streamline their work and ensure proper governance.
Board meeting rules
Board meetings are typically presided by the chairperson.
If the chairperson is not present at the meeting, he or she can appoint a person to chair the meeting.
The board meetings must follow the rules as outlined in the company’s articles of incorporation, bylaws or any rules established by the board of directors as a governing body.
Since a board meeting is similar to how governments operate, a number of businesses adopt parliamentary procedures to make the meetings efficient and give a fair chance to all members to be heard and give their point of view.
As such, Robert’s Rules or similar rules offer a fair and efficient set of rules for handling board meetings.
Every company can adopt rules specifically to manage their board meetings by defining aspects like:
- What can call the meeting
- How many board members must attend the meetings
- How many meetings should be held in a year
- Qualifications of the board members
- What can be done without calling a meeting
Meeting agenda
The meeting agenda is a very useful and important document when managing board of directors meetings.
Some companies mandatorily impose a meeting agenda before the board members meet.
Some other companies do not impose a meeting agenda although it is quite useful to have one prepared before every board meeting.
The meeting agenda is important as it will help:
- Avoid board members go off on tangents during a meeting
- Avoid lengthy meetings
- Focus on the points requiring the board to decide on
- Document the purpose of the meeting
Notice of board meeting
In many states and jurisdictions, the law requires that the board meetings be announced a number of days prior to the meeting date.
The notice must give directors a reasonable advance notification of a meeting.
Using a notice of board meeting, a company formally calls the board members to a meeting.
The meeting can be a planned or scheduled meeting or it can be an unplanned or urgent meeting.
The notice of a meeting is important as board members, even if they are absent, are personally responsible for the decision of the board.
As a result, this formality may lead a board member to be personally held liable for a decision that he or she was not involved in as they could not attend the meeting.
To avoid inner conflict with the board members, its good to notify all parties sufficiently in advance of the meeting so everyone can attend.
Quorum
For a meeting of the board of directors to formally take place, a sufficient number of directors must be present to satisfy the quorum.
The norm is that all the directors be present at a meeting.
In some cases, it happens that one or a few directors cannot be present.
In that case, the meeting of the board can formally take place provided the quorum requirements are met.
Quorum is the minimum number of board members required to be either present physically or be duly represented at the meeting.
If the company bylaws do not specify the specific percentage or number of directors present at the meeting, by default a simple rule of majority will apply.
In most cases, for a board meeting to take place, the quorum is for ⅔ of board members to be present at the meeting.
Motions
Motions are requests made to the board by board members.
You can have various motions, such as:
- Main motions
- Subsidiary motions
- Privileged motions
- Incidental motions
Just like a democratic parliamentary function, the chairman of the board should be notified of how many motions are expected to be presented and managed during a board meeting.
If the motions are presented in accordance with the company rules and accepted by the chairman, the board will decide on the motions and document their decisions.
Voting
After discussing the consequences and ramifications of different topics on the meeting agenda, the board members take a vote and either approve or reject the decision.
If the company’s governing rules and articles do not define the percentage required for a decision to be adopted, the simple rule of majority will generally apply.
Some other decisions will require two-thirds approval or even higher.
If a decision is approved by the board members, a dissenting board member may record the reasons why he or she was dissenting in the minutes of the meeting.
Meeting minutes
The board of directors meeting decisions and deliberates are recorded in meeting minutes.
Each individual board member is responsible for the decisions of the board.
Even if a board member is not physically present at a meeting, he or she will remain responsible for the decisions further to the collective responsibility doctrine.
The meeting minutes prepared are often read at a subsequent board meeting.
That’s done to ensure that the directors validate and ratify the content of the meeting minutes to ensure they faithfully reflect what was discussed in the previous meeting.
This is important as each member of the board is responsible for the decisions of the board.
If they need to record a dissent or reasons why they do not approve a decision of the board, that must be adequately reflected in the minutes.
By reading the previous meeting minutes at a meeting, the board members can also refresh their memory as to what was dealt with last time and how things have evolved.
The minutes of board meetings are legal documents by auditors, tax authorities and the courts.
They represent the history and documented decisions and deliberations of the board members producing legal effects for the company and each individual member of the board.
Governance
When the board of directors of a company operates efficiently, a company can reap the benefits of the synergies offered by the experience, skills and business savvy of each individual board member.
However, each member of the board must adequately carry out his or her tasks.
Over the past few decades, due to corporate scandal and fraud, the performance of the board of directors has been subject to much greater scrutiny.
The directors cannot just show up at a meeting and ride the wave.
Various stakeholders now require board members to be accountable for their decisions, show they are effectively carrying out their duties and demonstrate their diligence.
Each individual member of the board is bound by fiduciary duties to act in the best interest of the company, to observe the laws and be engaged.
Board of director meeting minutes sample
Board meeting minutes are crucial to properly document the decisions of an organization’s board.
There is no specific or standard format or content for the board of directors meeting minutes to follow.
What’s important is the meeting minutes accurately reflect what was discussed during a board meeting in a true and objective manner.
Board of director meeting minutes should include the following:
- Meeting date
- Meeting time
- Board members present
- Board members absent
- Who called the meeting
- Quorum
- Motions presented
- Conflicts of interest
- Votes
- Abstaining of votes
- Meeting end time
- Author of the meeting minutes
You can download our board of directors meeting minutes sample template as a basis to develop your own.
