It’s not in the Tea Leaves It’s in the Minutes

1. It’s not in the Tea LeavesIt’s in the Minutes Brian Herd Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E: bherd@crhlaw.com.au

7. Outline • Meetings and memories • The power of meetings • Agendas • Law of minutes • Role of minutes • The Good and the bad • Minute Issues • The future of minutes

8. Meetings and Memory • Memory • Encoding, storing and retrieving information • Problems with memory • Degrades with time • Distorts with stress • Fades with age • Reactivates unpredictably • eg by odour

9. Meetings & Memory (cont) Collective –v- Individual memory • Collective not as good as individual • Free riding • Meeting loafing • Collaborative inhibition • Inadequacies of collective memory • Der! Groups unable to recall previously made decisions without the aid of written record (minutes)

10. Power of Meetings • Proposition • The larger the meeting – the dumber it is • Compare the public rally and the private meeting • Do you agree? • More people means more types of people • Garulous idiot • Silent genius • Polariser • Referee • Fair minder • Me tooer • Foolishness fearer • Brinkmanshipper • Disdainer • Epicurian

11. Power of Meetings (cont) • A good meeting is about: • talking to discover collective wisdom; • making decisions; and • solving problems • That is the moving force for minutes • Record of: • Discoveries • Decisions • Solutions

12. The Parents of Minutes The Agenda • Minutes are the progeny of the agenda • Pedigree of your minutes depends on the genetics of the agenda • Good agenda means good minutes • not minutae • Does your agenda reflect your governance role • Govern not manage • Strategy/compliance/review/policy

13. Basic Agenda

14. Minutes and the Law • No legislation on agendas but there is on minutes • S.251A (1) Corporations Law • Company must keep minute book in which it records • Proceedings & resolutions of directors & members meetings • Resolutions of directors and members passed without a meeting

15. Minutes and the Law (cont) • Minutes must be lodged in minute book within one month of meeting • If not – may not be used in evidence • After meeting • Secretary responsible for compiling • Then send to Chair • Chair to sing within ‘reasonable time’ but will want verified by attendees • For monthly board meetings – at the next board meeting • For less frequent meetings – circulate to attendees for verification before month elapsed

16. Minutes and the Law (cont) • Once signed – only clerical errors can be amended • Corrections to be passed at a future meeting • Must keep minutes safely and indefinitely at main office • Can be stored in bound, loose leaf or electronic format • Eg can scan copy of signed minutes • Must be able to be reproduced in printed form • Falsification is a criminal offence • Members rights: • To inspect minutes of general meetings but not directors meetings

17. Minutes and the Law (cont) • Minutes as evidence • S.251A(6) Corps Law • “A minute … is evidence of the proceeding, resolution or declaration to which it relates unless the contrary is proved.” • Minutes are increasingly being used as a way of holding Directors accountable • James Hardie • The Disney case – the ‘case of the century!’ • These laws apply to NFP corporations!

18. Role of Minutes • Always assume they will fall into the hands of “A Current Affair” • Never to be assigned to: • Regurgitated ritual • A humble piece of parchment • No value • Near enough is good enough • A legal document & contract between directors • Record of governance • Evidence of your: • Functionality • Decisions • Duties • Responsibilities • Accountability • Compliance

19. Good Minutes • You need to have a policy on the style and content • Is less better? • Traditional view but wave of litigation against directors suggests not • Three broad types of minutes 1. Minutes of action • Intro remarks to an item and action outcome 2. Minutes of narration • Intro remarks, key discussion points and action outcome 3. Minutes of resolution • Just action outcomes

20. Good Minutes (cont) • Minutes should: • Follow the agenda generally • Be a true and accurate record of a meeting • Have clear and concise notes of main discussion points • Be an accurate and clear register of decisions • a record of what was decided • Ps not all meetings make decisions • Record any independent advice received or any additional information tabled at the meeting • Note who is responsible for actions and by when • Not be a job for amateurs • Be written in the third person • Be dull (not the meeting)

21. Bad Minutes • ‘Five Frogs’ Minutes • Dithering document • “It would be great if…” • “Someone should…” • “Do we all agree to…?” • “Can you try to…?” • Opinions and judgements • “an excellent report” • “a heated discussion ensued” • Criticisms or accolades • Unless by formal motion • Recording views of individuals • Direct speech or quotes • Who said what and when

22. Bad Minutes (cont) • “Mr Poindexter, an experienced business man with an elderly mother he is caring for, thinks that the budgetary surplus should be directed more towards delivering home care in order to keep up with the pace of today’s consumer care needs and that the organisation has selfishly ignored this aspect in favour of other initiatives” OR • “It was suggested that the budgetary surplus should be directed more towards home care in order to meet the care needs of consumers”

23. Bad Minutes (cont) • “Pursuant to the agreement, Mr Wendt received a cash payment of $45,000,000 at signing which amount was partial compensation for benefits he was forfeiting from a prior employer.” • Minute of meeting of Directors of Conseco (huge USA corporation)

24. Bad Minutes (cont) • Meeting Item – Meals • Chair – “One of the issues that came up while you were away, Bronwyn (CEO) is that when you step in as a chef if you like, the residents really enjoy the meals” • Bronwyn “ I haven’t done that for a while” • Chair “Perhaps the general cooks need a bit of tutoring from you” • Bronwyn “I think that is to do with the flavour and overall I don’t have any issue with the food as I eat here several times a week although there are things I don’t like ie the vegetables…” And on and on it goes…

25. Bad Minutes (cont) • Meeting Item – Maintenance Report “Price lists from 3 mower places were received and approval given to purchase the Cox Ride On from Barry’s Mower Centre for $4990” “Room 23 has a water leak” “Generator is not starting” • Meeting Item – Constitution “All amounts of $20 or over shall be paid by cheque and signed by any two of the Chair, Secretary or Treasurer. So we need to review our Constitution.” • Meeting Item – Correspondence In “Fair Work Ombudsman – Wages Audit”

26. Bad Minutes (cont) Minute of a Board meeting of a healthy lifestyle organisation (USA): Item – Membership of Board of Directors “It was discussed that, as advocates for a healthy lifestyle, the Board members should be seen as good examples of such a lifestyle. “It was resolved that a motion be put to the next general meeting of the organisation that a qualification for all Board members to be, or remain, a board member was to have a body mass index (bmi) no higher than 22”

27. Minutes Issues • Who takes the Minutes? • Secretary responsible • Can be someone appointed by the Board • Can be a director or employee or even an outsider

28. Minutes Issues (cont) • Should reasons for decisions be recorded? • Two schools of thought: 1. Recording of general discussion sufficient 2. Accountability & due diligence requires summary of reasons • My view is a brief outline of factors is adequate

29. Minutes Issues (cont) • Should directors take their own notes? • No legal obligation to • Can be evidence in a court issue • Helpful as a defence mechanism • Dangers and can create unintended consequences • Once minutes approved a directors notes are moribund

30. Minutes Issues (cont) • Should there be minutes of ‘in camera’ meetings? • Eg without the CEO or if a Director has a conflict • you should record especially if there could be consequences eg sacking of CEO

31. Minutes Issues (cont) • Should a dissent be recorded in the minutes? • If you attend a meeting then you are assumed to have agreed with a resolution or the action taken unless your dissent is recorded • In this day of director accountability recording dissent is important • If you don’t attend a meeting you are assumed to have consented to the actions of that meeting unless you provide a dissent within 7 days of becoming aware of the resolution

32. Minutes Issues (cont) • Should Board Minutes be made public? • No legal requirement unless required by Constitution • Most NFP’s don’t and there are good reasons • Transparency has risks ranging from dissension in the ranks to breaches of privacy and confidentiality • Your are entrusted by the organisation to govern the organisation and your accountability is at the AGM • Note the “Sunshine Laws” in USA

33. Minutes Issues (cont) • Should a Board Committee meeting be minuted? • Yes

34. The Future of Minutes • What minutes tell us • Board Policy • Technology • ACNC

35. What Minutes tell us • What minutes tell me: • The quality of governance • The quality of contributions • Awareness of obligations • Minutes which are a morass of minutae • Struggling organisation • No strategic focus • Organisations who have a contemporary and considered policy on agenda setting and minute taking • successful

36. Policy on Minutes • The law treats minutes very seriously now • They are evidence of the functioning of a board • They are used to assess directors liability • ‘Less is more’ may no longer be appropriate policy • Summarising discussions and giving beef to the minutes is the new trend • Encapsulates the ‘business judgement rule’

37. Technology ‘eGovernance’ & ‘Digital Directors’ • Technology is changing how boards operate and who sits on board • The How • The use of Skype • The paperless Board • I Pads for Directors • The Who • Boards starting to look beyond the usual suspects and see the advantage of digitally smart Directors

38. ACNC Governance Standards • Must comply with to ensure continuing registration • “mechanism which may enliven the enforcement powers” of the ACNC (The Regulations) • Five standards • Maintaining not for profit purpose • Accountability to members • Compliance with the law • Suitability of responsible entities (eg Directors) • Duties of responsible entities • Impact on minutes?

39. ACNC (cont) Governance Standard 5 • Organisation must ensure its responsible entities (Directors) comply with their duties • Act with care • Act in good faith • Not misuse their position • Not misuse information • Disclose conflict of interest • Manage financial affairs • Not operate while insolvent • What is the best evidence of this? • THE MINUTES!

40. The Price of Good Governance is Eternal Vigilance (and great minutes) Brian Herd Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E: bherd@crhlaw.com.au