Should you keep minutes of executive sessions?

AuthorLittenberg, Michael R.

Yes

THERE IS LITTLE established law concerning executive sessions--they are not mandated by state law--and market practice is still evolving. Therefore, executive sessions tend to vary widely in content and length. Similarly, record-keeping practices tend to vary substantially. Clients frequently ask me whether they should prepare minutes of executive sessions of the board.

The answer is a resounding "Yes." Although executive sessions are more informal and do not have the same standing as board committee meetings, they benefit from observing many of the same procedural formalities. The actions and omissions of outside directors have come under increased scrutiny by the plaintiff's bar, shareholders, and regulators. A matter that is extensively discussed in executive session may receive only brief treatment at a board meeting. Therefore, a record of these discussions can help to show compliance with fiduciary duties. Minutes also can serve an evidentiary purpose in a judicial or regulatory proceeding. Furthermore, courts tend to place a great deal of emphasis on minutes.

The question of whether to take executive session minutes is hardly an academic one. There already have been several court cases in which plaintiffs have asserted that meaningful discussions did not take place at an executive session because minutes were not kept. The focus on executive sessions by the plaintiff's bar is likely only to increase over time.

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The goal of executive session minutes is to accurately reflect the meeting. Minutes should address the principal items discussed and the tenor of the discussion. The minutes should not be a transcript of what was said by each meeting participant. Board members are less likely to engage in a frank and free-flowing discussion if they know their every word is being memorialized. Minutes should also reflect the procedural details of the session, such as the date and time of the meeting and who attended.

However, there is no one-size-fits-all approach to minute taking. The length and content depends on what is being discussed. Boilerplate minutes should be avoided.

The logistics of minute-taking at executive sessions can sometimes be a complicating factor. Board and committee meeting minutes often are taken by the corporate secretary or general counsel, who is a corporate employee. Outside directors may be hesitant to have a member of management at an executive session. They may be concerned about...

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