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Running efficient Board meetings

Updated: Dec 6, 2017

One of the best ways to demonstrate to investors, regulators (if you work in a regulated market) and other stakeholders that your company is operating effectively and building value is to have good governance practices in place. A well-functioning Board of Directors that has regular meetings is a great way to keep the key investors informed and engaged. Furthermore, a well-functioning Board is the critical component of a sound corporate governance. We offer some tips on how to better accomplish it:

1. Hold regular meetings. After securing the first external financing, one can expect to hold six to twelve Board meetings a year. The first impression is important so be sure to be adequately prepared following the financing round..

2. Ensure there is a meeting schedule. Schedule the meetings well in advance (at least a year, but preferably 18 months) before the Board members’ calendars are filled up. Be sure to include the assistants of the Board members and copy them on all messages around scheduling and administrative matters. It is also good idea to have some of the meetings away from the company’s offices for a fresh perspective.

3. Develop a standard Board Information Pack. Circulate the information at least few days in advance, but preferably a full week, so that all the participants have a chance to read it carefully. The minimum information should include key financial and operational KPIs, summary financial statements, comparison against plan/budget, functional reports (depending on your organization size and business, e.g. IT report, HR report, Sales report, Business development report, etc.), minutes of the previous meeting, any items for approval (e.g. mandate of the Board for certain investments, budget, etc.). Involve the Board in developing the information pack that serves the Board the best. It might be a good idea to choose one area for “deep dive” for each meeting.

4. Use the time efficiently. The Board members will be very appreciative when management can run Board meetings efficiently. Board discussions can often take on a life of their own, and while it is important to allow the Board to have meaningful discussions on important topics, it is also important to manage towards a timeline so that your meetings do not run far beyond the allocated time. Assigning estimated discussion times next to each agenda item can be a helpful tool to help guide expectations and to help ensure that you are able to reach each topic on your agenda. If a new topic clearly deserves attention or if the Board seems to want to spend much more time on an agenda item than has been allocated, there is a possibility to move the topic to the next meeting. Often Board meetings can be concluded in a two-hour period if all involved are focused on being efficient. It is important that the Board meeting topic does not turn into a “collective reading” of the prepared materials, but rather it is a Q&A session with the management on the topic and discussion of well-prepared Board. It is in your hands to set the expectations and manage the process.

5. Determine meeting attendees. Determine who gets invited to attend the meeting from the management team. Remember, this may be a political issue. Consider inviting management team members on a rotating basis to drill down on select topics. Empower management team members to make presentations to the Board on their functional areas. At the beginning or end of each Board meeting, allot time for a “Board-only” session”, even if there is no set agenda.

6. Take minutes. Minutes are intended to be “summaries” of the meetings. Usually “less is more.” I.e. the minutes should be a very high level summary of discussions and actions, with attached any appropriate resolutions adopted. Be careful about putting confidential information in the minutes. It is a good idea to have the legal counsel prepare, or at least review, the minutes.

7. Never surprise your Board with bad news. Keep in mind that Board meetings are not an alternative to regular communications with Board members, and they are a lousy forum for surprises, so be sure to keep your directors informed between meetings, particularly about important setbacks and what you are doing to address them. If you are going to discuss difficult or controversial topics, it is a good idea to call each Board member individually before the meeting so you know what to expect and can manage the discussion. The boardroom is not a good place for drama.

8. Adopt compensation guidelines. Have the Board adopt compensation guidelines for salary, bonus and option grants that will provide parameters to management in between Board meetings and speed approval of compensation matters at meetings. If the Board has Compensation Committee then the topic should be elaborated there before the decisions are approved by the whole Board.

9. Elect independent directors. Try to identify and elect independent directors with relevant experience. Spend time vetting and getting to know the independent director candidates, especially if they are recommended by your investors. Aside from the “checks and balances” these independent directors can provide between founders and investors, having them may be essential for review and approval of interested party transactions, and will become important for Audit Committee and Compensation Committee membership. In some cases, having independent directors might be not only a good practise but also a requirement by a regulator.

10. Create committees. At the appropriate time, create a Compensation Committee and an Audit Committee, each comprised of all or at least majority non-employee directors, if possible. This can help allocate key tasks to the directors most capable with respect to those tasks. If, for example, two of the members experienced in compensation matters have carefully reviewed proposed option grants or bonus plan parameters, the remaining Board members will have more confidence in the decision and should be able to approve them without a lengthy discussion, which frees up meeting time to discuss other matters.

11. Set an annual budget/plan. Management should present their proposed budget/operating plan for the following fiscal year at one of the Board meetings to be held one or two months before the end of the current fiscal year. Allocate more time for this Board meeting to review and discuss the proposed budget/operating plan.

12. Create process for transactions. In the context of corporate transactions, such as future financings and M&A, the Board needs to be very careful about demonstrating a careful and deliberate process. Showing that the Board is informed about the transaction and alternatives is critical. It may be advisable to create a committee of the Board, comprised of independent directors, to review and/or approve a transaction where there is a significant “interested” component (e.g. when an existing investor proposes to lead a new investment round).

13. Protect attorney-client privilege. Be sensitive to protecting the company’s attorney-client privilege. This is different than just protecting “confidential” information. Never discuss sensitive legal matters, especially litigation strategy or potential liability of Board members, with observers or other non-Board members present or without counsel present. These matters should be reserved for the Board-only session and company counsel should be included in the discussion. This will help you protect those discussions from discovery by opposing counsel in the event of litigation.

14. Use your Board. Don’t view the Board as your enemy. Most directors expect to be an active participant in the company’s activities. They often have many helpful contacts, and new or different viewpoints on issues that help create a constructive debate. They are trying to push you to succeed; don’t be defensive about their comments and suggestions.

15. Take action to avoid dysfunction. If you sense that your Board is becoming dysfunctional, take action. Ask your directors for feedback. Discuss your concerns with them. It may make sense to bring in new members or swap out existing members to change the dynamic. The situation will not likely improve on its own.

16. Mind the cultural background and differences. If the company has investors with different cultural background, it often means different expectations, working style and requirements. Be sensitive and accommodate them yet do not allow the differences to take your focus away from growing the business. Remember that the diversity usually helps in medium to long run, embrace it!

Tom Witzkopf

With credit to Craig Jacoby from Cooley GO

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