Innovation-Nations Good Practice Notes Board Meetings

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Innovation-Nations Good Practice Notes Board Meetings

1. Role of the board of directors

The role of the board of directors is to seek to ensure the companys prosperity by collectively directing the companys affairs whilst meeting the appropriate interests of its shareholders and relevant stakeholders ( Institute of Directors) Therefore the Board is required to: 1. Provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enable risk to be assessed and managed. 2. Set the companys strategic aims, ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance. 3. Set the companys values and standards and ensure that its obligations to its shareholders and others are understood and met.

2. Purpose and format of board meetings

1. The board should meet regularly to consider and decide issues affecting the company. 2. Board meetings should be run in accordance with the Articles of Association, as determined by the board itself and should follow best practice. 3. Board meetings should be carefully planned, facilitated and documented. Meetings should be regular, well informed and constructive. 4. The chairman has overall responsibility for the management of board meetings and should work closely with the company secretary (where there is one). 5. Meetings should be highly participative with very focused deliberations that result in strong, strategic decisions. Those decisions should be adequately captured in meeting minutes and then closely monitored for implementation. 6. The Combined Code on Corporate Governance sets out standards of good practice in relation to board matters. All listed companies incorporated in the UK should comply with this code; and it provides good practices for all companies (including SMEs) to follow.

3. Notice
1. There is nothing prescribed in Company Law about the notice to be given for a board meeting; the only requirement is that it should be reasonable. However, the length of notice may be stipulated in the Articles of Association or by an earlier Board resolution. What is reasonable will depend upon the nature of the business, the composition of the Board and other factors. However, normally at least 14 days may be considered reasonable. 2. Notice may be written or oral, unless it is set out in the Articles of Association or by an earlier Board resolution. 3. Normally, any director or secretary may call a board meeting.

4. Quorum
1. The articles of association will normally stipulate a minimum number of directors to form a quorum before the meeting can go ahead. 2. Having a quorum is not a substitute for giving notice of a meeting. Achieving a quorum will not validate a board meeting if reasonable notice was not given to all directors. 3. When calculating the quorum, the articles will often exclude any director who cannot vote on a particular resolution, perhaps because they have an interest in a matter that may be considered.

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Innovation-Nations Good Practice Notes Board Meetings

5. Agenda
1. Companies should prepare an annual timetable of Board and related Committee meetings, built around key events in the business cycle (including consideration of and approval of strategic plans, consideration and approval of detailed budgets, approval of annual report and accounts etc). 2. It is important to design an agenda carefully and then closely facilitate to that agenda. The agenda should: a. List the topics to address in that meeting (see Topics below). b. Specify how each topic should be addressed in the meeting (for example, to make a decision or undertake further research etc.). c. Specify the time to address each topic. Adequate time and importance should be assigned to the most important topics. These timings should be adhered to and if further discussion is required on any topic, it should be handled separately. 3. The agenda should take account of the issues and concerns of all Board members.

6. Topics
Topics to be included on the agenda of regular monthly Board meetings may include: 1. Minutes of the previous meeting. 2. Matters arising from previous meeting. 3. Declaration of interests. 4. Review of current corporate objectives and strategy; determining any changes that may be required. 5. Key performance indicators (KPIs) and actual performance compared with plan and target (financial and non-financial measures). 6. Operational reports & review: a. Sales & marketing b. Technical, research and development c. Manufacturing d. Logistics e. Suppliers f. People / Human resources g. Policies, systems, processes and procedures h. Information technology 7. Business risk management including review of business controls, insurance, contingency planning etc. 8. Finance - All board meetings should devote adequate time to review and discuss the financial results and forecasts (and if necessary decide on remedial action). Directors are required to satisfy themselves that the company's financial information is accurate and that financial controls and systems of risk management are robust and defensible. 9. Health, Safety & Environment 10. Corporate compliance 11. Shareholder and investor issues - There may not be a lot to do or say about some of these topics but it is useful to have them on the agenda to ensure that they are covered.

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Innovation-Nations Good Practice Notes Board Meetings

In addition, there will be topics to include on the agenda of specific meetings throughout the year including: 1. Approval of statutory accounts 2. Audit review 3. Remuneration review 4. Appointment of directors 5. Agreement of budgets 6. Agreement / review of Key Performance Indicators 7. Recommendation of dividends etc. These items should be listed and shown on the diary. There may be one off topics to incorporate in a regular meeting or it may demand a special board meeting.

7. Board papers
1. Board papers should be set out in an appropriate level of detail and should be issued well in advance of the meeting so that all the participants have adequate time to read them and prepare for the meeting. 2. Board papers to be clearly referenced to agenda items and pages to be numbered. All those present to be directed to the appropriate papers when they are being discussed. 3. The monthly financial report to the board should include: Commentary on the key issues, variations from plan and remedial action P & L, Balance Sheet, Cash Flow for month and year to date compared with budget (and compared with prior periods if appropriate) Capital expenditure Financing loans, shares etc. Taxation & grants Latest view of outcome for year and next 12 months 4. Other regular monthly reports required may include: Key performance indicators Sales & marketing Technical, research and development Manufacturing Logistics Suppliers People / Human resources Policies, systems, processes and procedures Information technology Business risk management Health, Safety & Environment These should focus on the key issues, identify variations from plan and describe remedial action. 5. There will be board papers for specific items which may include: Strategic plans Budget proposals Reports from sub committees Special items etc. 6. Proposals (not issues) with recommendations should be presented to the board. The board may then discuss and approve (or not) the recommendations.

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Innovation-Nations Good Practice Notes Board Meetings

8. Discussions
1. The board meeting should have constructive debate and effective decision making and this requires effective relationships and open communication. 2. Board meetings should provide an environment in which all directors can raise issues and concerns. 3. Any differences of opinion that arise during meetings should be dealt with in a mature, constructive and professional manner. 4. Detailed issues should be discussed outside the board meeting. If the discussions are drifting into detailed discussion, it will be necessary to identify who should be involved in the discussion and appoint one person with responsibility to report back. 5. It is important to avoid confusing management meetings with board meetings. Management meetings should be used to deal with day to day operational matters, whereas board meetings need to be concerned with establishing & maintaining the vision, formulating and owning corporate strategy, acquiring and allocating overall resources and settling & maintaining policies.

9. Decisions and action points

1. The chairman should summarise decisions and action points at the end of each matter what has been decided, what has to be done, who will do it and when will it be done. The chairman should ensure that everyone present is aware and understands at the meeting. 2. Votes at a board meeting are normally one for each director present, with the chairman having a casting vote in the event of a tie; unless the articles provide for anything different. 3. A director with a personal interest in a matter that is subject to a vote will usually be excluded from voting; unless the articles provide for anything different. 4. These action points should be clearly documented in the minutes of the meeting.

10. Minutes
1. When a meeting is held, there is a legal requirement that minutes are taken. 2. The minutes are the official record of the meeting. The companies Act 2006 requires those minutes are retained for at least 10 years. Shareholders can ask to see them. 3. Minutes allow directors to have their views on a matter recorded this can be useful if there are issues in the future. 4. Minutes should provide an accurate record of the proceedings at the board meeting and should be prepared and circulated promptly to all those entitled to receive them. 5. The Minutes of the previous meeting should be approved as being an accurate record of that meeting. Once approved, the minutes should be signed by the chairman of the meeting and filed in the minute book. Any changes required to those minutes should be recorded. 6. Minutes of the previous meeting and Matters arising from previous meeting should be discussed to review agreed actions, review further developments and determine further actions required. However, this needs to be carefully managed to avoid the entire meeting being devoted to the previous meeting.

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Innovation-Nations Good Practice Notes Board Meetings

11. Attendance
1. Attendance of directors at each board meeting should be recorded and apologies for non-attendance noted. Note: Companies covered by the combined code are required to incorporate a record of attendance of directors at board and committee meetings. 2. Other persons in attendance at the board meeting should be recorded and the reason for their attendance noted (for example company secretary, observer etc).

12. Sub committees

The combined code requires the following committees to be established in listed companies: 1. Remuneration committee to handle executive remuneration 2. Audit committee to monitor financial information, review controls and audit etc. 3. Nomination committee to lead the process for board appointments and make recommendations to the board. These committees may also be adopted by SME companies and would report to the board of directors.

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Innovation-Nations Good Practice Notes Board Meetings

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The Good Practice Notes Board Meetings has been reproduced for Innovation-Nations with the kind permission of David Lever FCIMA David Lever Business & Financial Solutions E: david@david-lever.co.uk

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