Well known company director and governance advocate, Henry Bosch, once described minutes as ‘a letter to an unknown judge’. However, these days, as veteran chair Graham Bradley noted in August, we could view them as ‘a letter to an unknown royal commission’.
Bradley was participating in a webcast panel discussion that coincided with the launch of a joint statement by Governance Institute and Australian Institute of Company Directors on board and committee minutes.
The statement, which is based on feedback from both organisations’ members, as well as legal counsels’ opinion, comes at a time when minutes have attracted heightened scrutiny, especially following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the ‘Hayne Inquiry’).
The royal commission effect
However, Anna Sandham, a senior governance consultant and Senior Company Secretary at Company Matters, told the panel that the principles of minute-taking hadn’t changed in the wake of the Hayne Inquiry. However, she noted that since the Inquiry, she’d been giving more consideration to what she included in minutes. ‘I will leave them and then I will have another read through, just to make sure they accurately record everything that I think needs to be recorded’, she said.
Douglas Gration, who provided the legal opinion for the joint statement and was company secretary of Telstra Corporation from 2001 to 2007, said the laws on minutes hadn’t changed since the early 2000s.
However, he said the James Hardie court case, combined with other events related to the global financial crisis, had influenced minute-taking practices and perhaps even the emphasis that courts and regulators now placed on minutes.
‘What they said in the James Hardie case was that minutes are a contemporaneous document, prepared roughly at the time when the meeting occurred. So, they are usually much better evidence of what in fact occurred than a possibly flawed recollection years later’, Gration said.
Minutes are a contemporaneous document… they are usually much better evidence of what in fact occurred than a possibly flawed recollection years later.
According to Gration, minute-taking appears to have evolved since the James Hardie case. ‘Minutes are… lengthier and go into greater detail about the reasons of why decisions were made than was the case in the 2000s.’ They have also changed from being something relatively routine and dull, to something that has to be done correctly, he said.
Bradley, who is Chair of GrainCorp, HSBC Bank Australia, EnergyAustralia Holdings, Virgin Australia and Infrastructure NSW, noted that minutes largely wrote themselves in the 2000s. ‘If you had a well written board paper, 90 per cent of the minutes would have been done before the meeting. Now I think there’s much more work required. A lot more judgment is required as to what goes into them and what doesn’t.’
Another change, he said, was to have ‘an action list coming out of the minutes where you summarise all of the actions to be taken by management, the board or board committee. That document can be more widely circulated as a checklist of what needs to be done before the next meeting. Then, at the next meeting, there will be a report against it.’
Bradley said he expects minutes to be clear and succinct, unambiguous, factual and written in plain English, with as few acronyms as possible, so that they are intelligible to a wider audience. He added: ‘The starting point for minutes is actually a good set of board papers, because in my experience, a good set of minutes sets out clearly the recommendations that management is making to the board and even the wording of the resolution that management is seeking. That can be easily understood by directors, but also changed if, in the course of the discussion, there is a need to modify it. It will also set out comprehensively the reasons and the considerations the board needs to consider in coming to that decision.’
Bradley said the mainspring of good minutes is effective chairing of board discussions. This means that at the end of each item, rather than rushing on with the agenda, the board pauses, and the chair helps to articulate where the board has got to in the discussion and what the resolution of the board is. This, he said, creates an understanding, not only by the directors at that time, but also by the company secretary later when trying to record accurately in the minutes what the board had resolved.
The recommended approach
According to the joint statement issued by Governance Institute and Australian Institute of Company Directors, minutes are not a report or transcript of the discussion or debate that took place during the meeting, or a record of an individual director’s contribution. ‘This level of detail is not required by law, would be inconsistent with the established practice of minute-taking and may stifle healthy boardroom debate. Too much information can be as unhelpful as too little and can cause a lack of clarity. While minutes can facilitate regulatory oversight, this is not their primary purpose. Minutes are not a purely compliance exercise and a “tick box” approach should be avoided.’
Too much information can be as unhelpful as too little and can cause a lack of clarity
The statement recommends including the key points of discussion and the broad reasons for decisions in the minutes. ‘This may help to establish that directors have exercised their powers and discharged their duties to act with care and diligence and in good faith, for a proper purpose and in the best interests of the company’, it says.
‘It is also advisable to consider the principles of the business judgment rule when preparing and approving minutes. If judgment is required and directors are balancing a number of competing risks and considerations in their decision-making, it is prudent to actively consider whether the minutes capture them adequately and succinctly.’
The statement stresses that it’s crucial that the way in which boards ‘challenge’ management on significant issues, as well as the responses received or actions promised, are reflected in minutes.
But it says it’s neither necessary nor desirable to record every question put and every response received. ‘It will normally be sufficient to record the thrust of significant issues raised in non-emotive and impartial language.’
The statement also recommends that minutes record the resolutions of the board as a whole because the board acts as a collective. ‘Typically, minutes should not record the votes of individual directors. Each director is, however, required to actively support or oppose a resolution, or expressly abstain from supporting or opposing it and it is advisable for board minutes to include any votes by directors against or abstaining. Minutes should record the reason the majority of directors were in favour of the decision notwithstanding dissenting views.’
According to the statement, it’s generally not good practice to include the length of time a board spent discussing an individual agenda item in the minutes. ‘Including the length of a discussion in the minutes is potentially misleading as it does not necessarily indicate the quality of the discussion or supporting board paper.’
It adds that the minutes should be the sole, permanent record of the meeting proceedings. Indeed, retaining notes may undermine the integrity of the minutes as the final record of the meeting. It also advises entities to adopt and consistently apply a document management and retention policy. This should address the following areas:
- which documents are required to be retained and in the format in which they should be retained
- when they may be destroyed
- material in a board portal
- the status of draft minutes and handwritten notes.
Finally, the statement urges caution and judgment in determining the degree of detail of legally professionally privileged information (if any) that is necessary to include in the minutes. ‘In many cases, it may be appropriate to simply note that the board considered relevant legal advice when making a decision’, it says. ‘Any privileged information in the minutes should be clearly identified and ideally included in an appendix or attachment.’