Bullish Thoughts: Board Meetings are Sacred

Mon Sep 14 15:55:02 CAT 2020

Bullish Thoughts: Board Meetings are Sacred By Chibamba Kanyama,

Last year, I was 30 seconds late for a scheduled board meeting at one of the
local organisations. The Chairman greeted me warmly and as I took my seat,
he expressed his displeasure about keeping everyone waiting, 'Director
Kanyama, we value your busy schedule though you kept us waiting. The meeting
was scheduled to start at 10.00 and looking at my watch, its 10.01. We have
lost substantial time.'

I have, however, come to dearly value this chairman for his discipline,
focus and attention he gives to detail. He conducts board business with
finesse, quality, and efficiency. When considering minutes from previous
meetings, it's like Picasso re-working his painting for that wealthy and
demanding client. He re-arranges statements to ensure the minutes truly
projects the spirit of the deliberations. At times, some of the other
directors wonder if he had been given a different copy of minutes full of
mistakes and inaccuracies.

He also ensures he is in the country early enough for board business (since
he resides abroad). It is clear by the way he handles meetings that he has
had incredible international exposure on governance issues. Since the early
'90s, he has served on various international boards and appreciates that a
board meeting sets the tone about the direction of the organization.

Businesses succeed or fail during board meetings. The board makes
significant resolutions that remain binding for the organization for
eternity unless reviewed. Mergers and acquisitions take place through board
meetings. New assets are acquired or disposed of through that one sentence
resolution, 'It is hereby resolved..' A business can close shop completely
or operations re-arranged through those meetings. Risks with prospects to
destroy the business prospects are identified through those deliberations
and decisions immediately made to contain them.

 <https://www.finsec.co.zw/> 

The working capital of the organization, being the lifeblood for its
existence, is repositioned through the board decisions that allow the
business to either acquire new debts, reduce debtor lead time, liquidate
stock or even retrench staff. Given the fiduciary role vested in the board,
we can only say that board meetings are nothing less than being sacred. It
is worrying to note that the latest Auditor General's report specifies poor
decision making by boards of parastatals as one of the key reasons for the
weak performance of most of the institutions.

There are elements that make a board meeting scared. First, setting the
agenda and its content is something that can either make the entire business
of the board successful or fail. In our board evaluations, what comes out
are complaints about board meetings failing to focus on strategic issues.
The main feedback is that board business focuses a lot on administrative and
operational issues. The reason this happens in my opinion is that the board
agenda and its content lack the depth to redirect discussion.

The agenda item should seem to have a balance between the reviews of past
performance and discussion of forward-looking issues. The temptation to
review performance is always high because that is what 'matters arising'
always seek to do. By the time there is a shift to focus on the strategic
issues facing the business, it is five hours, and everyone wants to go home.

It gets worse when those strategic issues are missing in the latter part of
the board agenda being board briefing papers and management reports. I have
personally observed these briefing papers and management reports also tend
to drift into past performance. The management team always wants to report
about what it did or not do because that is presumed to be what the board is
expecting. The board is equally expecting nothing less than a report about
staff performance, court cases the company is facing, strategic alliances
that may have been agreed, performance of the business in terms of income
for the period and the internal audit reports.

At times, the agenda does not even provide for ample time to debate. It is
in the debate issues arise, motions brought forward, voting takes place and
resolutions made. A solid board agenda contains the following: Prayer (which
happens in most boards in Zambia), Chairman's comments or remarks;
Declaration of Interest; Approval of minutes of last meeting and matters
arising; CEO report; financial performance (including risk
evaluation/report); Board committee reports'; Formal approval of matters
requiring limited discussion; Operational policy issues; Strategic issues
and Company secretary's report (which normally has updates on board
calendar).

The other element that makes board meetings sacred are the board briefing
papers. I have been in board meetings where the management reports are
larger than the national constitution. They look like a collection of all
departmental reports: from human resources to public relations. Each
department sees the opportunity to market its effectiveness to the board by
producing voluminous submissions. One would think managers do not have
enough time to sort out issues among themselves. Even the information that
would be irrelevant for a Board Committee Meeting finds its way into a board
briefing paper. That is why board directors yawn and want to go home soon
after the 'Matters Arising'. A board sitting should not be a punishment for
being on the board; it must be enjoyable.

Management reports should be short, timely, concise and of substance. Where
board Committees exist, these reports should basically be about the
Committee briefings and recommendations for approval. In other words, a
management report should be focused on issues of board interest and should
be action-oriented to allow for clear board resolutions.

I once attended a board meeting where management had several pages of
proposals to the board about the procuring of motor vehicles (and even had
an addendum containing various suppliers). I was taken aback because this
was purely a management issue. The board had earlier in the year approved
the budget that also contained capital expenditure. The vehicles were part
of the capex budget. Why should the board again seek to re-approve what it
had approved?

The real ritual about board meetings is the nature of decisions it makes.
This is the part every board member should pay attention to because the
resolutions are binding to everyone under collective responsibility. Board
resolutions can be found in the board minutes and deliver a precise record
of verdicts made at a board meeting. The board should have a record of this
resolution because individuals can be liable for the decisions they make.
The resolution permits management of the corporation to take on actions on
behalf of the company. It can also give specific advice to the management on
specific matters regarding the operation of the business.

In reporting about the sacredness of board resolutions, one writer said the
following, 'Sometimes the impact of a corporate resolution is so great that
the company may choose to present the corporate resolution at the Annual
General Meeting of the corporation for input by the shareholders before
taking a final decision on the resolution of the corporate resolution. This
allows the company to answer questions and build support for the corporate
resolution before making a final decision.'

At Zambia State Insurance Corporation where I served as one of the members
of management, I observed the solemnness by which board resolutions were
captured, inserted, and positioned in board minutes. They were in bold
letters, Arial font and inserted with some margin of distance between
paragraphs above and below them. This was a sure way of ensuring no one
missed such bold statements.

It is against this backdrop board meetings are usually a solemn assembly.
Nick Rice, a governance professional writes, 'The whole board is accountable
and liable for the board's actions and decisions. Under certain
circumstances, individual directors can also be held personally liable if
they aren't diligent in their duties. Resolutions provide proof that the
board is fulfilling its duties in an efficient, responsible manner.'

(Chibamba Kanyama is a Fellow of the Institute of Directors- Zambia and
Trainer of Trainers on Corporate Governance.)

Invest Wisely!

Bulls n Bears 

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