Louise Petschler, AICD General Manager, Advocacy, discusses the recent AICD and Governance Institute of Australia joint statement on board minutes.

    Since the Financial Services Royal Commission, the practice and law regarding board minutes has attracted heightened scrutiny.

    The AICD and the Governance Institute of Australia recently collaborated to release a statement outlining their position on minute-taking and critical issues for boards, supported by a legal opinion. The joint statement addresses a number of topical issues including the content and purpose of minutes, the treatment of drafts and notes, and the implications for director liability.

    Key conclusions included:

    • Board minutes are a record of board decisions and the process by which those decisions have been made.
    • It is advisable to include the key points of discussion and the broad reasons for decisions in the minutes. However, they are not a report or transcript of discussions during the meeting.
    • Minutes record the resolutions of the board as a whole. They are not a record of the contributions of individual directors.
    • Minutes should be the single, permanent record of the meeting proceedings.

    Further to this joint statement, the GLC spoke with the AICD’s General Manger, Advocacy, Louise Petschler, to explore the management perspective on minute taking. Ultimately it is important that the board and management are on the same page in relation to minute taking and can work together to ensure robust minute taking practices.

    GLC: What is the significance for management of the AICD and Governance Institute of Australia’s recent Joint Statement on Board Minutes?

    LP: The Joint Statement is significant new guidance on minute-taking from the AICD and the Governance Institute, bringing the director and company secretary perspectives together on this topical practice issue. The AICD knows from conversations with our members that there are lots of questions about minute-taking. How much detail should be in minutes, and what are the issues with too much, or too little, detail? Should every challenge to management be recorded? Should the minutes capture issues debated on significant items? These are the kinds of questions we have sought to address, supported by a legal opinion from counsel Dominique Hogan-Doran SC and Douglas Gration.

    A well-written board paper that canvasses reasons and risks effectively will likely reduce the detail needed in minutes.

    While targeted at directors and governance professionals, the statement is useful for management who implement board decisions and play a vital role in board reporting processes. It is more critical than ever that board papers are of a high quality, containing information that has been sufficiently analysed and evaluated by management. A well-written board paper that canvasses reasons and risks effectively will likely reduce the detail needed in minutes. Boards need to be testing and refining the information they are receiving from management. It’s beneficial for directors and management to have regular, constructive conversations about the adequacy of the board pack and ways to improve the analysis and presentation of information to directors.

    As the AICD teaches in our courses and we stress in the statement, it is critical that each director actively reviews the minutes, and that the process of finalising and approving the minutes is managed rigorously by the Chair. Minutes may be the best, sometimes the only, evidence that directors have complied with their duties in respect of the decisions that they have taken and in their general oversight of the company. Every director should review the minutes and be sure that they are comfortable with their content before approval.

    Ultimately, good minute taking practices benefit everyone – directors, governance professionals, management and the organisation itself.

    GLC: How do you think more minimalist minute taking practices (e.g. not referring to why decisions were made) impact on management?

    LP: Really the form of the minutes is up to the Chair and the board, and the level of detail they go into is their decision. It’s obviously critical that resolutions and decisions are clear. That’s the board’s record and the evidence of the board’s decision-making. Senior management will generally be presenting or briefing the board so you will have that context in translating decisions into actions. But management will change as will the make-up of the board. When you are looking back at board decisions after a period of time, it’s definitely helpful to management to have the resolutions clear and able to be read ‘stand-alone’. As we say in the statement, minutes should be written in such a way that someone who was not present at the meeting can follow the decisions that the board made. Ideally they should capture, clearly and succinctly, the board’s decisions and the material reasons for those decisions.

    Importantly, and we stress this in the statement, there is no ‘one size fits all’. In some organisations – think of a community organisation with limited staff – minutes might be acting as the organisational record, or boards might have other reasons for wanting more or less detail.

    GLC: If notes, drafts and other supplementary materials are destroyed once minutes are approved, will management risk losing useful information, including insights into particular directors’ perspectives and other nuances?

    LP: From management’s perspective the most important thing is that the board’s decisions are clear, actions arising are appropriately documented and followed, and that these are all translated into business plans with appropriate reporting back. I don’t think access to notes, drafts and supplementary material is key to those objectives – it could confuse the messaging. There needs to be one ‘source of truth’ as the record of the board’s decisions. Everything that is presented to the board should be part of the record. I do think directors keeping their own notes is an individual matter.

    GLC: Should minutes act as a vehicle for corporate communication?

    LP: Perhaps not as a vehicle as such, but the minutes will be one of the foundations of corporate record and reference. Mostly management will use them as a reference. Equally, and we stress this in the statement, there is no ‘one size fits all’. Across our diverse membership at the AICD there are lots of different practices, in a smaller community organisation, for example, minutes might be acting as the organisational record and be more of a communication vehicle directly.

    GLC: What steps might management take after a board meeting to communicate board decisions throughout an organisation?

    LP: Again, approaches will differ depending on the purpose, issues and complexity of the organisation. A common practice is for the executive group to have a debrief immediately following the board meeting – an important point to discuss direction and discussion at the board, confirm action items and priorities. Each executive would be expected to then convey this to their teams appropriately, taking into account any actions or priorities in their areas of accountability. Often the next tier of senior leadership would be briefed on board outcomes by the CEO in some way, so there is consistency for senior managers on the outcomes of the board meeting, that would then cascade. Frequently there’s a more general update for all staff – many organisations would have an internal comms framework and rhythm to this.

    Obviously, if the board is making decisions that are very significant or dramatic for the staff or organisation, you’d expect a more direct communication approach involving the Chair with all staff.

    You have to think about the purpose of communication with staff and what you are covering. The starting point is the action, change or initiative that management needs to progress. The organisational plans and action lists that management will draw up will be more detailed and different to the board ‘actions arising’, but the Executive with CoSec help will keep a close eye on actions arising, committee engagement and board reporting needs to make sure these are all covered. But there are also engagement and transparency drivers internally – keeping staff aware of what’s on the board’s agenda and sharing priorities (appropriately, and generally via the CEO, not by sharing minutes).

    Different types of organisations will also have different approaches – members tell us that some NFP and membership bodies and some public sector organisations might do a separate report from the Chair to members or key stakeholders (internal or external) on the major items the board discussed. That might be for different engagement or transparency reasons specific to the organisation. Some of those entities might have quite discursive minute styles, more so than corporate minutes, for similar reasons.

    Obviously confidential, commercially sensitive information and privileged information would not be shared widely. Listed entities have a different range of considerations on disclosure too.

    The minutes and board resolutions will serve as an important reference the further away from a particular decision you get in time – to revisit and confirm the parameters of board approval and direction. But you would expect management plans to be consistent with and regularly updated to accord with board decisions and approvals, so these will be reflected in internal strategies and business plans on an ongoing basis. And the CEO’s engagement with the Chair out of session will continue to guide and clarify matters and is an important piece.

    GLC: Board reporting and minute taking practices present opportunities for ongoing improvement and productive dialogue between the board and management. Are you observing any changes to these processes in the current environment?

    LP: One of the issues that came out in the Financial Services Royal Commission, and APRA’s Review of CBA’s governance, culture and accountability, was the importance of boards bringing constructive challenge to management. Obviously, boards and management want to have productive and constructive relationships. There is a benefit in boards being deliberate and thoughtful in setting up a framework that is respectful and constructive, and supports the challenge of management and management information by boards. The Chair and CEO are pivotal in this.

    Improving the quality of board reporting overall is important. Directors have to make complex strategic decisions involving a high degree of judgement. It’s of course up to boards to make sure that they are getting the quality of advice and reporting necessary from their management teams. With increasing demands and expectations on directors it is important the role of the board and its governance function is differentiated from management, and that boards receive the quality and context in reporting necessary to support decision-making.

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