Governance Bites
Mark Banicevich interviews a series of experts about governance, including company directors, lawyers, executive managers, and governance consultants.
Each interview is on a different topic related to governance, tied to the guest's expertise. He also asks interviews for the best governance advice they've received, or they would give to new directors.
Governance Bites
Governance Bites #60: board minutes, with Dauniika Maclean
In this episode, Mark Banicevich asks Dauniika Maclean about board minutes. They discuss minutes templates and meeting preparation, legal requirements, content of board minutes, and the process for creating and approving board minutes. Mark also asks Dauniika about the best governance advice she's received.
Dauniika Maclean is a professional company secretary, and a Chartered Member of the Institute of Directors, with her own business called Board Administration Services Ltd. She is company secretary for NZ Health Group, Unitec and Auckland Grammar School. She also has experience as a director.
#governance, #director, #boardroom, #boardcraft, #meeting, #minutes, #governancebites
Kia ora koutou. My name is Dauniika Maclean. I run a business called Board Administration Services, which provides bespoke governance administration for boards, trusts, charities, and really any kind of company that needs that kind of administrative support. We are specialists in minute taking. I also provide implementation of board software, as well as help with board reporting and really anything else that a company requires in that governance process. So, what a brilliant person to speak to about effective board minutes, thank you. I know everything about it. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, today I have the pleasure of spending more time with Dauniika Maclean. Thank you, Dauniika. Pleasure. Thanks very much for coming. We’re going to talk about effective board minutes,
and the first question that I have for you is:what essential information should be included in the template? Sure, well, the template should have most of what’s on the agenda. So, it needs to have the name of the company and whether it’s a board of directors meeting or a subcommittee, exactly what it is. It needs to have the time, date, and location of the meeting. It needs to have the names of all the attendees, and that should be differentiated by board members, so the directors, and then attendees, which would be your executives and your guests, those that aren’t actually members of the board. Then you should have what’s on the agenda, so the number and the agenda item, as well as any resolutions or approvals that are required, and then the close time of the meeting. Also, it’s quite good practice to have when the next meeting is going to be. Right. So some of that will be part of a standard template and then some of it will be things that you’ll prepare before the meeting, where you pull out the template and start populating certain information. Yeah, that’s right. So, your template would be the name of the company. You wouldn’t know in advance what the agenda items were going to be, until you had the agenda. So certainly when the time came to do the meeting, you should pull the agenda out and you should put those agenda items in, and you should take word for word what the resolutions are in the board papers and populate those into the minutes because that should be reflective of what’s there in the papers. So, is there any other preparation that you can do in advance? Reading the papers yourself, I think, is really critical, especially if you’re a board secretary that is contracting to a company and doesn’t work there and have that company knowledge. Reading those papers really gives you the context of what’s going to be in the discussions that you can understand what those discussions are, because sometimes they are quite separate and very specialised in terms of what that topic is. If you don’t have that context from what’s written in the paper, what the directors are getting as well, then you’re not going to be able to understand it enough to be able to accurately summarise for the minutes. Right. And how much of the minutes are you taking during the meeting and how much of it is tidying up after the meeting? So, I personally take raw notes during the meeting. I’ll write down the essence of all of the conversations that are being held, all of the key details, taking a really strong point to notice any actions that are talked about, any kind of follow-up that’s talked about, any decisions, obviously. Then I go away and I summarise what I’ve written down in my notes using the board papers for that context. So, it’s a much higher-level summary than what the verbatim discussions are. Yes, of course. What are the legal and regulatory requirements for board meeting minutes in New Zealand? In New Zealand, it’s law to have board meeting minutes for all meetings of directors and subcommittees. The New Zealand Companies Act [1993] states that in section 189, that directors' and at subcommittee meetings, minutes must be taken and kept. The signed copies of those minutes will be the official company record. Right. And the Incorporated Societies Act [2022], I think, has a similar requirement. We have a huge number of very small companies in New Zealand that also have directors. Is there a requirement to have board meetings? Yes. Right. So, we probably have... Even with one director in the company, you are still the board, and you need to have at least one meeting a year to sign off your [annual accounts]. Which is probably what the accountant is doing as part of [their process]. Right, generally. So, if you’re a sole director or sole trader, then you just generally... That’s how most companies will meet that requirement. Yes. Because I think I looked up yesterday, and there were 770-odd thousand companies[726,359 at 31/12/2023] in New Zealand, and most of them, I’m sure, are, you know, zero employees. In fact, I think out of the enterprises in New Zealand, 73% have no employees. Really, wow. There were 605,000 enterprises, according to Stats[Statistics] New Zealand, and 73% have no employees. Wow. So, they’ll be contracting firms and things like that- Yeah. - where they’re probably not formally having those sorts of meetings and taking notes, which would mean they’d be relying on their accountant. to meet that legal requirement. Yeah, I mean, they should still be signing those for, - Yes. - you know, with their accountants. They should have knowledge of what they’re signing and keeping records of that. Yeah, the interesting thing that I find is that the process of having governance meetings, no matter what size your company is, is still valuable. You know, thinking about how the company’s running, thinking about its future and risks associated with it, and so forth. Absolutely. But getting off topic a little bit. What’s the most efficient way to capture the essence of the discussions without recording verbatim conversations? It’s really focusing on, not necessarily what the executive is telling the board, because they’re often repeating information that’s in those board papers. Yes. It’s really the conversation that the board is having, any questions that they’re asking, any actions, obviously, that they require, any kind of follow-up. You kind of have to keep a knowledge bank of what’s relevant to the company and the industry. So, finance and insurance, for example, is a lot of focus on customer conduct, - Yes. - solvency, you know, those kinds of key things. So, you need to really focus on discussion around those key points that are relevant to the industry, - Yeah, right. - as well as anything that’s, you know, relevant under company law. When you’re taking notes, are you taking notes of who makes certain statements among the directors, or is it purely what’s being said? In the minutes itself, it should be reflective of the board. Yes. Because the board is - One unit. - considered one entity. There are some situations where you might say XYZ asked this or said this or dissented or noted that they had a conflict; then you absolutely talk about someone as an individual. Right, of course. Yeah. But in terms of decisions, it’s always the board as one single person, by one entity. So, when you’re going away and writing those minutes and summarising your information, then it’ll be referring to the board. Yeah. You wouldn’t say, you know, "Mark asked why blah blah blah"; you’d say, "there was a question", or,"the board questioned". Right. Yeah, passive voice. Do you ever find yourself in a position where you’re going back to an individual director and asking them again what they said, or I guess after 15 years you probably don’t have to do that? No, no, it’s a really good question because I do. Sometimes you just can’t capture the full kind of essence of what was being discussed in real-time fast enough during the meeting. Right. And if you haven’t recorded it and you don’t have something to go back to, to re-listen to, then I do need to go and just check and kind of make sure that I’ve got down what was being said. More with the executives rather than directors, just making sure that the conversation they had, especially if it’s financial or legal and there’s a very kind of nuanced conversation that went on. Right. You know. Getting the facts. Getting the facts right. The way that they’re worded. You know, just need a little bit of help with that. Yes. Yeah. Yeah, that’s understandable. And I take it, I mean, ultimately, you will want your minutes to be clear and concise and effective, and that process of going away with your notes and then summarising it would be the way that you achieve that, right? Yes, absolutely. Yeah, it just gives you the headspace to be able to concentrate on that higher-level summary. You can kind of look at it as a whole, as opposed to being there in the room and trying to listen to what everyone says and kind of, you know, your brain’s working through. I did once have a meeting in a board meeting for a sports organisation I was involved in where the minute taker took verbatim minutes. Reading through them afterwards to determine their accuracy was just painful. Yeah. Completely unnecessary. That’s quite a common occurrence. Is it really? Yeah. Oh, that’s terrible. What key details should be included when you’re documenting resolutions? So, the wording of the resolutions themselves should be there. Yes. They should be quite clear in the board papers. If they’re not, then you should be going back to the executive who wrote the board paper before they go in the board pack to kind of say what are you actually asking of the board. Right. In advance. Yes, and then it needs to be whether the board approved it. If the company follows Robert’s Rules [of Order] and there are movers and seconders, then you need to record who moved and who seconded. If it's in the constitution and you need to record the number of votes, then you actually need to state the number of votes. Right. For and against. And if their were any dissenters. Abstentions. Exactly. Any abstentions. And conflicts of interest should be noted down, too, if there are any relevant conflicts. That makes sense. If you've got, you know, shareholders that are conflicted and deciding on a dividend payment, for example.
Technical point:in Robert's Rules, you actually don't have to note the seconder. Ah. You do note the mover but not the seconder because in Robert's Rules, the purpose of seconding a motion is purely to say,"Yes, let's discuss this," not to agree with it. Well, there you go. It's actually quite possible for the seconder to vote against a motion. Wow. The other thing that a lot of people - in fact, I've seen a lot of constitutions - get wrong is this concept of the chair or the president having a casting vote. And that's again, I think, a misreading of Robert's Rules. Because, of course, every person on the board should have one vote, not having one person getting a second vote. But the point is that the chair or president doesn't actually cast their vote at all unless it changes the decision. And you need a majority to pass. So if it's equal, it doesn't pass. It's that simple. There's no, "Oh, let's, you know, let's have a casting vote." So the only time the president casts their vote is if the votes are tied and they want it to pass, then they'll vote for. And if the votes are one off being tied, or one in favour, and they want it to not pass, then they'll vote to bring it to a tie. Huh. That's technically it. It's interesting, isn't it? Yeah, I hope that's not in many constitutions these days. Yeah, but I have, I've seen it. Yeah, actually, even recently, I've seen constitutions that say president has a,- Wow. - literally in the constitution, the president is casting vote. Not so much in big companies, of course, - Yeah. - but in smaller entities. Yes. Yeah, a bit of a side note there for you. What is the process for reviewing, once you've actually documented the minutes, what's the process for having them approved and finalised? Well, the draft minutes should go to the chair for review initially. In some companies, the CEO [Chief Executive Officer] might like to look at them first just to make sure that there's accuracy in terms of what was discussed. Yeah. It's important that there's no bias that's put in, if they're going to an executive first, so kind of best practice is that they go straight to the chair for review. Right. Once they're reviewed, they should be circulated to the rest of the directors. But they're not approved as final until the entire board approves them at the following meeting. Right, okay. And how do changes come about? So a director says, "No, no, that's actually not what we agreed." How does that happen? Well, that should go to the chair and it should be discussed as a whole board. Right. The board needs to decide. It can't be just one person changing the minutes. Yes. So, that's really up to the chair to bring that up at the board meeting. So that actually waits until the next board meeting? You don't do it by circular resolution between board meetings? You can, but general practice is it's the next board meeting, that's where that discussion and approval would happen. Right, so in the board meeting, somebody would be saying, "I want to note a change to the minutes." You are potentially change the minutes on the spot,- Precisely. - and then approving? Yeah. Okay. Precisely. By all means, they can, in advance, query something in the minutes, and if the board secretary agrees that that should be included, can put it into the draft and advise the chair that that change has been put in there. Right. But generally, the role of the board secretary is to take an objective record of the discussion. Yes. And write that down as they heard it and understood it. Right, okay, okay. Where and how should the approved minutes be stored? So you need to store them in the company records. Most companies do that digitally these days, - Yeah, of course. - but they should be filed in an organised way in one central place, generally having them kind of locked down, so that they're confidential. It's not just general company record. They should be easily accessible for auditors, you know, to be able to provide to the auditors. Yes. And if you're keeping physical records, then they should be in one spot. So you might have a minute book,- Or in 1973. - or you might have a, yeah. Yeah. Big bound leather book, that you paste the minutes into. So it'll either be in a secure place on the company's server that only the board can access, or potentially these days in board software like BoardPro or Diligent, or something. Yeah, we've got BoardPro or Diligent, and those will hold the approved minutes. And if you don't have software, then the approved minutes should be kept as a PDF[Portable Document Format]. You shouldn't be able to edit it. Yes, to change them. Yeah, of course. Of course. How long should they be retained? Indefinitely. Legally for, I think, seven years or ten years. But there's really no reason to dispose of board minutes because that's the record of the company's history. Right. So they should be kept. Okay. Forever, really. Yeah, right. In which case, you know, I was going to ask you about the protocols around disposal. I guess the answer is, "Don't". Don't. If you do, for some reason, or like there's a duplication, if you've got a physical copy, then I think just secure destruction or, you know, - Yeah. - whatever your company policy is for destroying confidential documents. Yes. Are you involved in many boards that have physical board packs these days or are they all digital? They're all digital, now. All digital, yeah. I, just wondering whether board packs would also be destroyed securely after board meetings? Yeah, I mean, when I first started out, there were physical board packs- Yeah. - and I would print and bind all of them. And then I'd collect all of them afterwards, unbind them to keep the bindings, and then put them in a secure document destruction bin. Yeah. The CEO would keep a copy of the board pack, and would just, literally like archive boxes of filing. Right. Right. These days, it's all digital. Yeah. These days, it's all digital and you should keep a copy of the board pack. Yes. As well. It should be viewed contemporaneously with the minutes. But again, most companies run board software systems these days, and that obviously keeps all the board packs there. Certainly large companies, because some of the board software is quite expensive, right. So they have to be able to [afford it]. Yeah, a lot of the smaller ones too. You know, BoardPro is quite reasonable in comparison to Diligent. Stellar Board is somewhere in the middle. But that kind of BoardPro is often used in smaller organisations, SMEs [small and medium enterprises], you know, incorporated societies. It's got not-for-profit pricing, school pricing, - Right. - so that's used quite often. So it makes it very affordable. Yeah. Okay. Final question for you. What's the best advice you've received, either as a director or as a company secretary? Probably that be prepared point. Both as a director, and as a co-sec [company secretary] or board secretary, is reading the board papers. Yeah. I think it's the most important thing you can do to be prepared for the meetings. Right. I can imagine that. Going to a board meeting in the role of board secretary; the international sports organisation I was on, I took the minutes of those meetings. I could not do them without being prepared. Yeah, you very much, as you say, you know, completing a template, writing, having the agenda items and so forth was all of that in advance? Absolutely. Yeah, if you don't have that context and information in advance, then you're just, you're on the back foot the entire time and you're kind of scribbling to kind of write down and compute what's being discussed. Right. The crazy thing about the minutes that I took is the way we were trained, we just used Robert's Rules. So you'd only record motions. Yeah. There was nothing around the discussion. So going back to board minutes, you know, six months or a year later where you're reading through and going, what actually happened? Exactly. There's no history, there's no context to the decisions. Yeah. Yeah, no, I think Robert's Rules is a bit outdated these days. In the modern world, we tend to, we don't often do movers and seconders, and we really, really record the substance of the discussion, you know, at a high level, certainly a summary of. But to show that that history of the company, really. Yes. They say that minutes are a letter to the law, so the court will, if they're looking at a company, will pull the minutes from their board meetings as evidence, - Right. - and that's what's going to tell the story of. Absolutely. You know. I think the other thing that I noted is if the board ever makes a decision that is contrary to the recommendation of the executive, you've got to have some reasoning for it. Yeah. So having those sort of summaries in the minutes is absolutely essential. Yeah, absolutely. You've got to show, you know, the law states that directors need to act in the best interests of the company, so it needs to show that they've, you know, that they've discussed this, that they've noted this, that they've, you know, given it due consideration - Yes. - before any kind of decisions are made, to really show that they were acting in the best interests of the company. Yeah. Right. Well, Dauniika, thank you very much for your time. It's a pleasure. It's great to catch up. Yeah, yeah. I'll look forward to seeing you again soon. Thank you. And see you next episode.