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Legal

[Video] It’s not in the Tea Leaves, It’s in the Minutes


Published: August 18, 2022

Read Time: 37 minutes

The humble Board Agenda and its progeny, the Minutes are often assigned to a spring back folder and buried on a shelf somewhere. There is little appreciation at board level of the marketing power of these documents.

Brian examines the principles of a good agenda and minutes leaving attendees with new respect for the importance of these documents in painting an organisation, not just in retrospect, but in prospect.

Transcript of It’s not in the Tea Leaves, It’s in the Minutes

Brian Herd: Minutes. Welcome, I’m Brian Herd the lawyer, and welcome also to the discomfort zone. By genetic makeup and legal training, I love making people feel uncomfortable. You’ll probably go back home after this, seminar and go back to your normal cultural comfort, will you?

Class: Mm-hmm (affirmative).

Brian Herd: Represented by that sort of intelligent reason? Le Mont Saint-Michel, a large rock on a small island, untouched by the loving tides of change or the dark scouting clouds above, or even worse, a rampant avoidance mentality of the realities of life, and not for college, or even this, back to the detail, back to daily detail. No big picture stuff anymore, that’s only for conferences, isn’t it? Once a year they pitch us stuff, now we go back to detail or even this organisation.

You know, you gotta have a warped sense of humour. I actually took this photograph. I couldn’t believe it. I was walking down the road one day and there in Spring Hill and Brisbane. I look to my left, Incapacitated Subbranch of a not for profit organisation. Not only that, it’s a subbranch, it’s not even the branch. It’s and Incapacitated Subbranch. Self esteem issue.

So, lets get out of that culture of comfort, and into the culture of discomfort and no squawking. No following the leader. This is what we’re going to do. We’re going to talk about meetings and memories. You know the song memories?

Speaker 3: Yes.

Brian Herd: Could you give us a small rendition? No?

Speaker 3: But thanks for asking.

Brian Herd: That’s okay. We’ll talk about the power of meetings, agendas, the law of minutes. There’s a law about minutes? The role of minutes, the good and the bad, you will not believe.

Speaker 4: I would.

Brian Herd: You would, would you? What people put in minutes, it’s just amazing. Then we’ll talk about some minute issues, then finally, the future of minutes. That sound riveting?

Class: Mm-hmm (affirmative).

Brian Herd: Uplifting almost.

Speaker 3: Yeah.

Brian Herd: The power of minutes. Meetings and memory. What is memory? It’s encoding, storing, and retrieving information. Pretty basic. It has problems, have you noticed that? Looking around the audience, I think you’ve all got a problem because it degrades with time. It degrades with stress, it fades with age, and it can reactivate unpredictably. With odour. Did you know that smell brings back memory?

Speaker 4: Yes.

Brian Herd: My wife has this practise of taking me for our annual honeymoon. This’ll be- this year was our 23rd honeymoon, and she takes me for one night to the Palazzo Versace. Have you heard of Palazzo Versace?

Class: Mm-hmm (affirmative).

Brian Herd: You should go there.

Speaker 4: For a honeymoon?

Brian Herd: All sorts of reasons, but it’s the smell. They have these little candles burning all over the Palazzo Versace. In your room, in the corridors.

Class: Toilets.

Brian Herd: Everywhere. And what you have is this memory as you walk in. It’s the Palazzo Versace, I’m back home again. It brings back memories of the previous 22 occasions that I’ve been there. Fantastic. Memory is really unusual like that.

So think about having burning candles, scented candles, in your next- yes madam?

Speaker 5: Sweeten the moment, are your slides available for that one?

Brian Herd: No, they are not. I jest, for a reasonable fee they will be though. No, they will be available.

So memory is very unpredictable, very unreliable.

Meetings and memory. Did you know the collective memory is not as good as individual memory? Known scientific fact, a collection of human beings can’t remember as much as one human being. Because when you’re in a collective of people, such as a board meeting, there are a few free riders. You heard of free riders? Who are just free riding. They’re only there for the sandwiches. You know those ones? I love them.

I used to be on a board where they’d bring them in big silver, oblong trays, and they squash all the sandwiches on and they cover it with clean film. And they always put the egg and lettuce ones on top. And they would all get squashed underneath. You just can’t wait to put your hands on those sandwiches.

They’re free riders. They’re there for the food, nothing else. Meeting loafing. They loaf during meetings. They’re there because they might get paid to be there and that’s all that they’re there for. Nothing to do for them, just to get paid.

And there’s a collaborative inhibition in a collection of human beings, there is. If this was a meeting of the board, god almighty, that’s a big board isn’t it? A lot of you won’t say anything. Not a thing. Because you’ll be collectively inhibited because there are so many other people. And I gotta come to a theory here, the bigger the board the dumber it is. This is an amazing- have you heard about the nature of people in an audience? There are three types of people in an audience.

Speaker 4: Oh no.

Brian Herd: Yes, there’s people that sit in the front row. There here because they’re hungry and salivating for knowledge and information. People like you, you’ve been writing notes, I haven’t said anything yet.

People in the second row, they’re here because I might look into that. Oh yeah, I might be able to make it into something.

There’s people who sit down and stand at the back of the audience. You know what I’m told they do? They sit there the whole time and think about nothing but sex.

You should have a night among the board you’re gonna call sexual thoughts. Don’t take any minutes. I read that in the back.

Inadequacies of collected memories. Der daddy, as my daughter says, der. Groups are unable to recall creatively made decisions without the aid of der? Is that right? Is that a der? Is that a der moment? Sure is.

The power of meetings. Here we go, the larger the meeting the dumber it is. Remember when Hitler spoke to the crowds at Nuremberg? Thousands and thousands of people right in front of him as he paroled. Now, do you reckon there were any dissenters in the audience? Anyone who put their hand up and said excuse me I don’t. . . so this was mass hysteria because it was a really big audience. Really big audience.

So compare that public rally with a private meeting. The smaller the meeting, the smarter it is. That’s why boards have got 27 members on it. It’s a dumb board. Anyone on that 27 board? The smaller the board, the smarter it is. Because the bigger the board, the more types of people you have. Have you got any of these sort of people on your board? Garrulous idiots?

Class: Yes.

Brian Herd: They never shut up. They just keep talking. They say the obvious, and they just won’t shut up. They gotta talk see? They gotta talk.

Silent geniuses, you got one of them?

Class: Mm-hmm (affirmative).

Brian Herd: They only say one thing in the meeting, one thing. And it’s really, really, really intelligent and probing and insightful. You got some of them?

Class: Mm-hmm (affirmative).

Brian Herd: Mm-hmm (affirmative). What about polarizer? You got any of them? People who polarise the board? What is it? Try to? Goodies and baddies? Saints and sinners? Pawns and Halo type people? You got them? See the bigger the board the one two three already.

Referees, you know those fair minded type people. Come in the board, Bill, now come on, those sort of people? Referees on boards, there useless. They’re fair minders.

Or me tooers, you got any me tooers? No one puts their hand up when I say that. The foolishness fearer. Oh, I don’t think we should, no. If I said no, oh. The fear of being foolish. Stops a lot of people from talking, do you know that? It does. It really stops them, it’s really sad. I say go foolishness. Speak.

Brinkmanshippers, disdainers, and epicureans. The come for the food, that’s right. All they do is they sit there and go I’ll have a baguette now. Just those food. That’s all they want.

So the bigger the board, the dumber it is. And this is all getting to the point of minutes, I can tell you.

The power of meetings, a good meeting, a good meeting is about talking to discover collective wisdom, making decisions, and solving problems. Very simple concepts. Very simple concepts, but are you really conscious of that when you go to a meeting? We’re here to discuss, to make decisions, and to solve problems. And that philosophy is the moving force for minutes. The generic bases of preparation of minutes. It’s a record the minute of discoveries, decisions, and solutions. Do your minutes say that? Do they discover, decide, and solve? Is that what they do?

Speaker 4: Mm-hmm (affirmative).

Brian Herd: The parents of minutes. The agenda. Minutes are the progeny of the agenda, aren’t they? The agenda is mom and dad, the progeny is the minutes of that coming together. A good agenda means good minutes not minutae. You’ll come shortly to a very interesting examples of the extraordinary minutia that some organisers go into, in terms of their minutes. They go on for pages and pages. That’s because they tape record their meetings and then the secretary usually goes right ahead and transcribes the whole recording of the whole meeting. Question and answer, question and statement, it’s amazing. It goes on and on and on.

So you can imagine I’ve got a few slides today, just a few, of course they reproduce all the conversation. Does your agenda reflect your governance role? Does it show that you governing not managing? Does your agenda, that’s the sign, that’s the signal. What’s on that agenda as a reflection of either that or that. And we’ll come to some really interesting examples of the fuzziness on that. Some organisations, when it comes to agenda shortening. Does it show your strategy, compliance, review, and policy making, ethos, as a board or not? Basic agenda, that’s what it looks like, they’re very basic. You might have a different one than that. You might have something a bit more sophisticated than that, but that’s a really good basis to start with the parent of your meeting.

Those sorts of issues are really just very basic agenda items, and you notice this one over here? Action? Action. You can actually get people to say I agree to do something over here and insert it in there so you got record of it. Really important. Minutes- this is the good stuff we’re coming to. Shifting in the chair, they’re very comfortable chairs too, I like it. Lovely orange plastic chairs. Slippery slide. This will finally start to agitate.

There is no legislation on agendas. Now remember, everything I’m telling you is applicable to not for profit organisations, your not byer any more, you’re not sacred. You’re not left out of the loop anymore, as far as the law is concerned, you’re all part of the same game. You are. So all this applies to you. So if a, for example, company limited by guarantee, as many not for profits are, you’re what called a corporation. Sounds impressive doesn’t it? Corporation. As a corporation, you’re subject to the corporations act, as a corporation. And this is what section 251 capital A bracket 1 of the corporations law applies to the keeping of minutes. It says a company must keep minutes in which it records, must, not may, must. The law.

Proceedings and resolutions of directors and members meetings. Resolutions of directors and members passed without a meeting. So they didn’t contemplate you having like an e-meeting, for example. Or even resolutions passed over the phone or by some other mechanism. So this is the law, you mush keep minutes of the records of these things. You must.

And it goes on to day that minutes must be lodged in the minute book within one month of the meeting. It’s the law, I’m just here to tell you. I’m the messenger. If not, it may not be used in evidence. In other words, if you don’t lodge it in one month you may not be able to use it in evidence. This was an issue in the Hardie’s case, that I come to shortly. James Hardie? Who said no. Someone down in the back obviously, because they’re off sexing somewhere.

Speaker 4: About sex.

Brian Herd: James, that’s right, asbestos. After the meeting, this is the law, the secretary is responsible for compiling the minutes, sending to the chair, and the chair doesn’t have to sing the minutes. Doesn’t matter if they do sing the minutes at the next meeting, but they don’t have to sing the minutes. Sex on the brain, you’ve upset them.

To sing within a reasonable time, that’s what the law says. For a monthly board meeting, the reasonable time would be the next board meeting. If you don’t have monthly board meetings, then you’d have to circulate to the attendees for verification before the month has elapsed. That’s the disadvantage of not having monthly meetings, you’ve got this damn ritual you’ve gotta go through remotely, with all the directors, to try and apply to this law. Because your next meeting is not for another two months.

Look at the eyes opening. [inaudible 00:14:28] did you know that? Once signed, the minutes, this is the law, only clerical errors can be amended. Corrections to the minutes must be part of the official meeting. You must keep them safely and indefinitely. Not for a limited period of time, indefinitely. Now that you guys care, you’ve got to keep records for certain years back.

Speaker 4: What’s this signed, can they be get digitally?

Brian Herd: Yes.

Speaker 4: Scanned?

Brian Herd: Yes, they can be kept digitally.

Speaker 4: Rather than in a book.

Brian Herd: They can as long as they can be printed in hard copy. This is the trouble of power points, just like those power points that slide across one after the other so you can’t get people right there.

Speaker 4: Nothing about sex.

Speaker 3: You’re on the wrong board though.

Brian Herd: So, must be able to be reproduced in printed form. Falsification is a criminal offence. What are the rights to the minutes? Members of an organisation can inspect the minutes of the general meetings but not of directors meetings.

Speaker 6: Do you have to sign each page? Or just the record of the minutes.

Brian Herd: Just the end of the minutes, as a regular meeting.

So, what about minutes as evidence in the law? So we now talked about what the law says about keeping minutes, what about the use of minutes so fare as the law is concerned? Section 251 capital A bracket 6 of the corporations law says a minute is evidence of the proceeding resolution or declaration to which it relates, unless the contrary is proved. And minutes are increasingly being used as a way of holding directors accountable. And this is the whole thesis of my presentation today. Those little mangy minutes that you keep are very pregnant when it comes to the law in terms of what they reveal or don’t reveal. They are very significant documents. They are not just to be assigned to the archives. And the two best examples of this are the James Hardie case, and what they call the case of the century, the Disney case.

James Hardie, striving company, manufactured many years ago asbestos. Many years ago, they resolved at a directors meeting to set up a foundation or a fund to compensate victims of asbestos. They issued, the board did, a public declaration, public media release to say that they’d established a fund and it was fully funded to meet all future claims. It turned out, of course, it was woefully underfunded.

So ESIC then took on the board, each member of the board of James Hardie for false and misleading conduct. But issuing that press release under the authority of the board, when in fact the fund was totally inadequate. What really was interesting in this case was the whole evidence against the board turned on what?

Class: The minutes.

Brian Herd: The minutes. The minutes. The minutes. And, not only that, they turned on the inadequacy of James Hardie, this is a large, multinational public corporation, and don’t you think big companies just know how to do things right? I don’t think so. They’re successful because of themselves, almost. The bigger you are, the harder it is to fall because well you are, you’re just big. It’s very hard to fall. They had woefully inadequate minutes.

Speaker 6: Who ended up lying about the-

Brian Herd: The directors.

Speaker 6: That their existing during those minutes? Or ones that came after them?

Brian Herd: The ones that who were there or should have been there through all their acting. We’ll come to that matter, absence shortly.

Speaker 6: Can we inherit other people’s mistakes or something?

Brian Herd: No, we can’t inherit their mistakes, no. You can’t.

Speaker 7: Being on a tele conference doesn’t make it-

Brian Herd: No, that’s true.

Speaker 6: Just a-

Brian Herd: Yes?

Speaker 6: Sorry, just to clarify, so the minutes taken, they have them on the board, they can’t go after me, they’re going after-

Brian Herd: No, no, no, no, no, do you really think the law is that unreasonable? But you would not be liable for something you were not even responsible for being part of. It wouldn’t be, it’s just silly. Go in the back.

Speaker 6: Yeah, that makes sense.

Brian Herd: Anyway, what revealed was two things, one is that James Hardie didn’t comply with that section. In other words, they didn’t do their minutes within one month of the meeting. Consequence of that was that the minutes couldn’t be used as irrevocable evidence of what happened at that meeting. See the power of that one month? The power is if you do it within one month, it’s evidence. If you don’t, it may not be so the reality is they had that first problem.

[crosstalk 00:19:21]

Speaker 8: Is that encouraging people to be dishonest?

Brian Herd: What do you mean.

Speaker 8: Well, not to do minutes in time or not to complete the minutes because it might be held against them later on?

Brian Herd: That’s very. . . [crosstalk 00:19:36] the second thing about James Hardie, of course, was that they had pre- this is interesting- they had pre-prepared the minutes of the meeting. Do you do that at your boards? Where you come into a board meeting and sitting in front of you are the minutes of the meeting you’re just about to take. Unbelievable.

Speaker 6: How can you treat your minutes.

Brian Herd: How can you? Cause they wanted to cover off this foundation issue. They wanted the minutes to be put in front of the directors before they discussed it or what it should say. So there was no doubt about what it should say because it was about to go over the market. So that his pre-prepared minutes that they’re all signed off on, no real discussion at all. No real discussion. And this was the real, vital flaw, no real discussion. They just relied upon magic to tell them what they needed to believe and what they needed to agree to. They went down in a screaming heap, each of the directors and the whole court of Australia. A screaming heap.

The Disney case. Ever heard of Walt Disney?

Class: Mm-hmm (affirmative).

Brian Herd: Disney Land? Disney lives in Disney Land. The Disney Company, fourteen years ago, the Disney Company employed a Mr. Michael Ovitz as it’s new CEO under an employment agreement. Within fourteen months of his engagement, he was terminated, and they paid him termination payment of one hundred thirty million dollars. He was there for fourteen months. I reckon if someone says to me, do you want to be chief executive over- yes. Now where’s the termination clause? Not I want to see the termination- because as soon as I walk in, want to walk out. He must have thought that. I’m not a winner here, I’ll stay a little while just to be respectable, like fourteen months, and then I’ll get a hundred thirty million dollars. And I walk out after fourteen months.

The case, the litigation over it, went for ten years. Because you can imagine the share holders at Disney were outraged. Outraged that their board could have agreed to an employment agreement that allowed for a termination payment of a hundred and thirty million dollars. No matter when he left. So they took on the company, the shareholders, and the case went for ten years. Ten years. And the trial lasted for 37 days. Imagine the lawyers’ costs. Notice how quickly I’m screening because I’m getting paid for this. It’s a bit sad if they didn’t pay.

So they took on the Disney company, and what was revealed in this was the evidence in relation to the board’s consideration of the employment agreement where he was employed fourteen months before. The employment agreement came to the board, that is the terms of the agreement for their approval fourteen months before he took out the job. They had the most cursory, the most cursory examination. They didn’t examine the agreement. There was just a doc point summary. None of the doc point summaries included the claws which said if he terminates his contract he’s gonna get paid a hundred thirty million dollars.

So the board gave scant regard to the detail of this particular agreement, and, not only that, the minutes gave scant detail to the discussion of the board about this agreement. That’s even more important. This is a significant- this is the employment of the CEO of a very large corporation with massive implications in terms of any termination.

So this law, as I said before, applies to you, any of the corporations. The Disney case, James Hardie, and all the other divisions of the corporation. You are not immune.

Speaker 9: Does that include incorporated not for profits as well as [inaudible 00:23:31].

Brian Herd: No, only the corporations law. If you’re a company that- if you’re an incorporated association, you’re governed by, in your own state I imagine, an associations and corporation act.

Speaker 9: Yes.

Brian Herd: But don’t think you’re out of this.

Speaker 9: I realise that.

Brian Herd: This is just the law. I mean, quite apart from being the law, it’s good practise. It’s just good business practise to do what the law says.

Speaker 10: So, in the Disney case, who wrote the document?

Brian Herd: Someone in the employment of Disney. The Human Resources manager.

Speaker 10: The chairman of the board didn’t-

Brian Herd: No, they were so desperate to get him, see, they really wanted him, they were prepared, as they did, to really run rash of their obligations.

Role of the minutes. Always assume they’ll fall in the hands of a Current Affair. Always. Always assume they’re a public- they’re not a public document- but always assume they’re going to be. Always. Never assign your minutes to regurgitated rituals. One particular company or corporation I went in to review, in terms of their corporate governance, it was quite remarkable. They appeared for twelve months they had a monthly board meeting, and almost without fail, with every minute of every board meeting, the same person made the proposed resolution and the same person seconded. And just this mirror, this on and on regurgitation. Bob moved and Ceril seconded. Bob moved and Ceril seconded. Now doesn’t that tell you something?

Speaker 10: That they[crosstalk 00:25:09].

Brian Herd: No, no, no, no, no, no, no. There were eight people on the board.

Speaker 10: There’s only two people.

Brian Herd: Only two people were acting, either moving or seconding resolutions. That tells- there’s a sickness in that board, a sickness.

Speaker 3: Everyone was there for the sandwiches.

Brian Herd: It’s not a humble piece of parchment. It’s not a document that has no value, as we’ve seen before, it has significant value, and near enough, in terms of the preparation, is not good enough. It’s a legal document. A contract between directors.

Speaker 3: Sorry, it’s near enough is not good enough or near enough is good enough?

Brian Herd: Near enough is not good enough. That’s ten seconds[crosstalk 00:26:00].

They are a record of your governance. They are a record, a demonstration, a manifestation of how well you govern your organisation. It’s evidence of your functionality, decision making, duties, responsibilities, and carry on compliance. In the minutes. There it is for all, eventually, to see.

Good minutes, so now we’re going to talk about what’s good minutes and how we can do bad ones. Bad minutes. The first thing about good minutes is you need to have a policy, don’t you?

Speaker 4: Yes.

Brian Herd: What’s your policy on the star and content of your minutes? Unless you have a policy that you comply with, the person who’s keeping them is not going to know what criteria what prerogative- whatever- in terms of using or producing the minutes. Is less better? Is less better? The traditional view was that it is. In other words, you have this very spare, minimalist approach to minutes. You simply said subject, discussion ensued, Bob moved, Ceril seconded, passed. That’s the minimalist approach. But because of the litigation now against directors, the suggestion now is that is simply not good enough. Because if you, as directors are confident, you need to be able to defend your competency. How can you do that? By properly prepared minutes as a record.

Because maybe you’re collective memory is not going to tell you, is it? Who said what seven years ago. It’s not. So you’re going to be relying on that written document called the minutes of your meeting to defend yourself.

There are three types of broad approaches to taking minutes, here are the three of them. Minutes of action, where you have an introductory remark to a discussion, just a general discussion, introductory remarks, and then an action outcome. Then we have minutes of what’s called narration where you have introductory remarks, then you have key discussion points, and then you have action outcomes. That’s the more full type of minute taking. Then you have what’s called minutes of resolution. This is the bare one, the one I just mentioned. Just action outcomes.

So, the issue for you is, in that wide range which ones or which approach would you use bearing in mind this is you. Now I’ll come shortly to what I think you should be doing in terms of how you should star and save your minutes.

Minutes should, as good minutes, follow the agenda. They should be a true and accurate record of the meeting, have clear and concise notes of main discussion points, be an accurate and clear register of decisions, a record of what was decided. Not all meetings make decisions. You know, some people feel compelled when they go to a board meeting that they have yo make decisions, gotta have motions, and resolutions, and that. You don’t have to and you can still feel not guilty when you eat the sandwiches. Anybody ever passed a motion? Record any independent advice received or any additional information table at the meeting, that can be really important, especially if you’re relying upon that to make decisions.

Note who is responsible for actions and by when, very important. Not be a job for ammeters. Be written in the third person, and the definitely have to be double. I love a good double minute. They’ve gotta be double. You can’t have you know expletive deleters wriggle through the minutes, it’s gotta be an objective record of what was said and the decisions. No adjectives. I like adjectives, I do because they bring words to life or people to life or events to life, but please don’t bring your minutes to life. Make them dull. You can have an interesting reading, please have an interesting reading, make it interesting, but the conversion of the interest and the meaning has to be into dull, when it comes to minutes.

Remember what the cameras did? And they come with the cameras one way in your eyes, it’s early, so we got a copy of your minutes from your last board meeting. What? Where’d you get them from? Never you mind. It says- not only have you defamed some of the minutes, because people do that they defame it, you wouldn’t believe it would you? What people put in minutes is just amazing. It’s an ego thing, see? There going to be saying I said this and I want it recorded. You know, that sort of A type personality? Always drive on the right hand side of the road, stop signs are for other people, sleep is a nuisance, and death a temporary interlude. You’ve got one of those people on your board as well? So make them dull.

Bad minutes. Have you got a five frogs minutes? You know the old story about the five frogs? Five frogs sitting on a log, one decides to jump off, how many frogs are left?

Speaker 4: Four?

Brian Herd: Five because one only decided to jump off. That’s what so many minutes of board meetings are like. Oh we made all these decisions, but what about the action? We gotta do it. So I see these sorts of things recorded in minutes, these sort of introduction comments. This is sort of the referee type chair. It would be great if this and this. Someone should or they- you don’t know they, I mean, do you realise how many they’s there are out there? They should do something. This is it, they record it in the minutes. Or do we all agree to, or can you try to. Now remember, I’ve got these in quotes, that’s because I’ve extracted these from other people’s minutes. This is the action time, apparently, in their minutes.

Try and also exclude opinions and judgements. Saying things like the CEO presented and excellent report, and the next day, what do you do to the CEO? You sack them.

Speaker 5: For a hundred and forty million.

Brian Herd: For a hundred and thirty million dollars. You don’t want to be making those sort of evaluative comments about people, especially staff, when it can be thrown back in your face.

It sounds like a good idea, because it’s nice to compliment people, isn’t it? It is. And you can do it at a board meeting. Don’t put it in the minutes. Because it’s like an endorsement, it’s like a performance review. Your minutes become a performance review, I don’t think so. Or a heated discussion ensued. Have you seen that in the minutes? You don’t want that, you don’t want emotion in minutes. Just a discussion ensued and then a summary of the discussion would have been great, but the heated bit sounds like it’s a dysfunctional board. Nothing wrong with discussions and disagreements, but not heated ones. Not heated ones. Not brinkmanship ones.

Avoid criticisms or accolades unless by formal motion. Avoid recording views of individuals, direct speech or quotes, or who said what and when. All that you should know. And here’s an example of the good and the bad, now this is an object- I changed the name of the person- this was extracted from H Care board meeting, Australian Health Care board meeting. Mr. Poindexter, an experienced business man with an elderly- this is in the minutes! With and 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- selfishly ignored this aspect in favour of other initiatives.

Now you don’t believe me do you? You think I’m making that up. Because you wouldn’t do that for you board minutes, would you?

[crosstalk 00:34:06].

It’s in the minutes. Instead, what they could have said is this. It was suggested that the budgetary service should be directed more towards home care in order to meet the care needs of consumers. That in the third person, it’s unemotional, it’s not heated, it’s not a value judgement , it’s not a personal commentary, it’s not saying anything about his personal life, such as I’ve got an elderly mother. What’s the relevance of that?

You see? The good, the bad. Now let’s get to the ugly. You looking forward to that? Are you ready?

Pursuant to the agreement, Mr. Wendt received a cash payment of forty five million dollars at signing which amount was partial compensation for benefits he was forfeiting from a prior employer. Now that that was extracted from the minutes of a meeting of the directors of Conseco. It’s a huge, multinational, U.S. corporation. So here is a minute, a little line, three lines in the board of directors, the very last corporation, saying that when they engaged Mr. Wendt to be the CEO, they’re gonna pay him forty five million dollars in partial, not complete, partial compensation. What else did he get? For benefits he was forfeiting from prior employers.

So, issue, why would you pay him forty five million dollars just to move from one organisation, just a change over. Just to walk across the road. Forty five million dollars. Was there any evidence in the notes of any discussion about this? Any reliance upon any independent report or analysis or spreadsheet? Nothing. This was it. So, guess what. When the shareholders found out about, they were hot to trot. Hot to trot. And the biggest, biggest argument and the best evidence against this board was this little three line minute, that’s it. They were all found negative by Pennsylvania supreme court.

Speaker 4: Did Mr. Wendt get his forty five million?

Brian Herd: He did.

Speaker 4: And more probably.

Brian Herd: He did because it was the agreement. They couldn’t impugn the agreement. More bad minutes.

This is an item from an H Care organisation in a small, rural town. Anybody from a small rural town? I should start yours ma’am. Here’s the- this is in the minutes. Here is the item in the minutes- meals. So, meetings times, meals. Chair- this is in the minutes- on of the issues that came up while you were away Bronwyn,- who’s the CEO- is that when you step in as a chef if you like, the residents really enjoy the meals. I’m reading from minutes here, I’m reading from minutes. Bronwyn- I haven’t done that for a while. Chair- perhaps the general cooks need a bit a tutoring from you. Bronwyn- I think that is to do with the flavour and overall I don’t have any issue- on and on and on and on. It goes on for pages.

Speaker 4: On and on.

Brian Herd: About meals and Bronwyn chipping in as a chef, not just a CEO. Anyone double as a CEO/chef in your board? Amazing. I just- I get very tired of- I almost said Bronwyn, just do it.

But not a good way to record here, not a good way.

Speaker 4: Did they lease the cook?

Brian Herd: From the same minutes- this is really, really, bad- from the same minutes, meeting item, maintenance report. Price lists from three mower places were received and purchase the Cox Ride On from Barry’s Mowers at fou thousand nine hundred ninety dollars. Room 23 has a water leak. Generator is not starting. Now, is that called operational issues?

Class: Yes.

Brian Herd: Do you really think the board needs to know about where to get the next Ride On mower? Or there’s a water leak in room 23? We need to- we need to know that. We don’t. Well, what about, this is where they’ve got all their priorities wrong. So this is operational stuff. This is for the CEO, not for the board. Then they have this item, main item co- cor- now this is serious, constitution. And it says, this is in the minutes, all amounts of twenty dollars or over shall be paid by check and signed by any two of the chair, secretary, or treasurer. So we need to review our constitution. Full stop.

Right, right. So now, right. It just stops there! And then they go on to a meeting on correspondence, and they get a letter about a wages order from the - and this is the one line of all the important items that you would have thought this board would have to address at this meeting, a letter a failed wages order letter might engender a bit a discussion.

But what engenders a discussion is ride on mowers. But one item is just a record of what has happened as apposed to any discussion about it. So the CEO hasn’t popped in and said, hi, look we don’t- that sort of comment you’d expect to see, wouldn’t you? But now, it’s just in a hint. A piece of paper came in with a stamp on it. It’s just mind blowing. I can’t conceive. How this organisation survived. I just can’t conceive, but it does.

This is the minute of a board meeting of a healthy lifestyle organisation in the U.S.A., item, membership of board of directors. It was discussed that as advocates for healthy lifestyle, the board members should be seen as good examples of such a lifestyle. It was resolved that the motion be put to the next general meeting of the organisation. The qualifications for all board members to be, or remain, a board member was to have a body mass index no higher than 22. Now I know we all qualify for that organisation. Would you put that in your minutes if you were a healthy lifestyle organisation? Would you even contemplate having that sort of minutes. [crosstalk 00:40:30].

Speaker 4: Do they have discrimination over there?

Brian Herd: They do, but they have exemptions for discrimination [crosstalk 00:40:40]. Yeah, when you read something and go, what? And I’d love to know what happened to the motion. What the board looks like now. Of course, remember, this is an American organisation, the world centre of obesity, and there we are.

All right, now lest deal with some issues of minutes. Issues, issues. Here take some notes. The secretary takes the minutes. The secretary is a formal legal position, it’s not the personal assistant or the stenographer. Anyone used to work with stenographers? Had short hand? It’s amazing, you know, if you have somebody in your organisation does short hand, they’re a great minute taker. They really are. Will that work out?

Speaker 5: No, the assistant.

Brian Herd: All right, all right, just look.

Speaker 4: They just do things quicker.

Brian Herd: All right look, the secretary is a legal position by law under the corporations act. So the secretary of the board, who is a board member, is responsible to make sure the minutes are taken. They don’t have to take the minutes, they’re responsible for making sure they do. So you can appoint someone to so it. Can get an outsider or a director. It’s up to you who you think is appropriate. There’s no law about who should do it. Although, come show me to some interesting technological devises that allow you to do it very easily.

Should reason for decisions be recorded? Two schools of thought, in the minutes, recording of general discussion is sufficient. Second school of thought, accountability and due diligence requires summary of reason. My view, is that a brief outline of factors is adequate as a precursor to the actual resolution or decision. I have to rush.

Should directors take their own notes? Now when you see directors taking their own notes at the board meeting, that tells you something about that board, it does. It’s a dysfunctional manifestation, but some people do it. There’s no legal obligation to do it. If you take your own notes, it can be used as evidence in court. Sometimes it can be helpful. Dangers, dangers, dangers, once the minutes are approved, directors notes are moribund. The minutes are the minutes of what happened, not directors notes.

Should there be minutes of in camera meetings? You know, when your board gathers to sack the CEO? Should you do a minute of that meeting? Of course you should, definitely.

Should a dissent be recorded in the minutes? I object, Mr. Chairman. If you attend a meeting, this is the law, then you are assumed to have agreed with the resolution or the action taken unless your dissent is recorded. In this day of director accountability, recording dissent is very important. If you don’t attend a meeting, you are by law, you are by law, assumed to have consented to the actions of that meeting unless you provide a dissent within seven days of becoming aware of the resolution. That’s the law.

Speaker 6: What is your protection then as a director, if you’re recorded as dissenting to the decision and the decision has a disastrous outcome, but you’re still accountable under the act?

Brian Herd: You’re not.

Speaker 6: You’re not? So if I was one of those directors and I said I recorded a dissent, then I would be absolved.

Brian Herd: Correct. That’s the whole bit.

Speaker 6: The organisation, and fine.

Speaker 4: As long as the dissent is recorded.

Brian Herd: Yes, of course.

Should the board members be made public? No legal requirement unless required by your constitution. Some organisations actually publish their board member to their members. Most NFP’s don’t, and there are good reasons why you shouldn’t.

Speaker 4: That’s right.

Brian Herd: Although, if you decide to set up in America, be aware in America they have what’s called Sunshine laws. In America they take the view of the lawmakers that if government funds your organisation then you accountable to the government. In other words, you’re accountable to the taxpayer. Therefore, you must, in America if you’re government funded, publish the minutes of your board meetings. To the world because you can’t identify each tax payer who has funded you so, that means publish you’re minutes. Its called a ray of sunshine on your organisation. Transparency, in other words, which words, accountability, transparency, all those sort of things? So, just count your lucky stars we don’t have Sunshine laws in Australia.

Should a board committee meeting be minuted? Of course it should.

The future of minutes, what minutes tells us, board policy, technology, and ACNC. What do minutes tell us? This is from my vast experience with NFP’s and boards. They tell me the quality of governance, the quality of member’s contributions to the board, and they tell me the awareness of the board’s obligations. Minutes that are a morass of minutiae, such as the conversation about the chef, is a struggling organisation with no strategic purpose. Organisations that have a contemporary and considered policy on agenda setting and minute taking are successful. There is a connect. There is a connect. This is my experience.

Policy on minutes, the law treats minutes very seriously, they are the evidence for the functioning of a board, they are used to are used to assess directors liability. Less is more may no longer be appropriate. Summarising discussions and giving beef to the minutes is a new trend. Encapsulates what’s called the business judgement rule. How can you demonstrate, as a director, your views? This business judgement rule, which is the basis of how they assess the decision making you have in a board. The minutes are the record.

Technology, changing how boards operate and who sits on boards. The how, using Skype for board meetings, who uses Skype for board meetings? Yes. Paperless board, iPads for directors, now you can actually get, I read the other day and I’ll tell you about it, is you can get what’s called a minute mask. Have you heard of the minute mask? That’s a name. It’s a special mask device that fits snugly over your mouth containing a specially designed microphone. One can compile the minutes in real time when the mask feed, that is your voice, is fed through a speech recognition engine. Unbelievable. No typing, merely editing is required. The mask acts like a mini sound booth that excludes extraneous noise and mutes your voice as well. Who wants a minute mask? Raise your hands up, who wants a minute mask? What a great idea. Minute masks. Have a look in your local wherever you find a minute mask. Harvey Norman?

Finally, the ACNC, on the first of July, the new government standards came in. You must comply to ensure that you continue to register and be registered with the ACNC. Failure to comply with the government standards could result in you being de registered, a disaster. Five standards, there they are. They’re in force now. The first five, you’ll about them more in detail tomorrow. What’s the impact of these standards on your minutes? Government standard number five, organisation must ensure its responsible entities, you’re not actually called human beings in this legislation, you’re called responsible entities. How’s it feel like to be an entity?

So your responsible entity, also know as a director, must comply with their duties, act with care, good faith, not misuse, not misuse, disclose, manage, not operate. What is the best evidence of whether you’re doing this? The minutes. The minutes. The collective memory recorded in a document called the minutes. The price of good governance is eternal vigilance and great minutes.

Thank you for your time.

Author

Partner
HopgoodGanim Lawyers
About

Brian is a partner with HopgoodGanim Lawyers. He is also a part time member of the Queensland Law Reform Commission and chair of the Queensland Law Society’s Elder Law Section. He spends a significant amount of his time and expertise in advising the not for profit and community sector on governance, restructuring and constitutional review, mergers and acquisitions, legal compliance and risk management. He has presented at many conferences on the changing legal dynamics and needs of the sector and what he calls their 3M’s – melding their mission, with margin and management. He says working in the area gives him the unparalleled opportunity to mix his passion for the community sector with the love of his profession.

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