What puts you at risk and how to protect yourself
Minutes are your first and best defense: Minutes prove that a meeting took place, who attended, what was discussed and what was decided. If it ever comes down to a courtroom, the other side has to prove the minutes are not correct. If it can’t prove the minutes are wrong, they stand as proof of exactly what they state. It’s like using a piece of paper as a suit of armor.
Minutes are all about your duties to be duly diligent: Well-crafted minutes ensure you are protected by demonstrating that you were duly diligent when making board decisions. As a director you have a duty to act as a reasonable person would in similar circumstances (the duty of care) and to act in the best interests of the organization (the fiduciary duty). Great minutes demonstrate that you received sufficient information from a reasonable source and that appropriate discussion occurred in making the decision.
Goldilocks had it right: Sometimes answers are found in the simplest principles – not too hot, not too cold or, in the case of minutes, not too long and not too short. Getting the right balance is as much an art as it is a science. Ensuring your corporate secretary has the resources and training to strike the right balance is definitely in your best interests. Great minutes provide brief context for decisions: what was being decided and the information the board was given about the decision.
They also highlight the key areas discussed by the board and reviewed with management before the decision was made. Your minutes are too short if they simply indicate decisions that were made and don’t provide a general statement of issues discussed. They are too long if they set out who asked and answered every question.
The minutes are yours: Board minutes are exactly that – a record of what occurred at the board meeting. They are not a record of what the management team thought you should hear or what it wishes it had said. Read your minutes to make sure they reflect the directors’ views and discussions. If you find discrepancies or errors, make sure they are corrected before the minutes are approved.
Accuracy is everything: There is no slippery slope with minutes; there’s just a big cliff. If one set of minutes is not entirely accurate, every set of minutes is suspect. Perhaps a resolution is shown as being passed, when it was missed. It seems innocuous at the time, but litigators know to ask the corporate secretary, under oath, whether his/her minutes are always 100 percent accurate. If just once there was something amiss, every set of minutes becomes suspect and your suit of armor is more than merely dented.
Directorship is a team sport: Decisions are made by the board as a whole (except where there are delegations made to a committee or an individual). It doesn’t add to your defense to single yourself out in the minutes by having your name noted every time you speak. More likely, it shines a spotlight on you and leaves you vulnerable. The same is true for your fellow directors, so getting your name in the minutes is not just unimportant, but can also be downright risky. It’s better to adopt the approach that people providing reports (such as committee chairs) are identified, but other topics are shown as overall board discussions, staying away from the ‘he said, she said’ approach.
Notes are downright dangerous: Get rid of your notes – all of them! Not right after the meeting, obviously, but right after the minutes are approved (usually at the next meeting). At the end of the day, there should be only one true and final set of minutes. Your notes are discoverable evidence that a litigator can use to ‘prove’ the minutes are incomplete or inaccurate, or to single you out for not asking a question you have written in the margin. Keep your armor in tip-top shape by reading all the minutes, making sure they are accurate and then shredding your notes as soon as the minutes are approved.
Sylvia Groves is president and creative director at Governance Studio.
