January 18th, 2016 Executive Sessions: What They Are and Why You Should Have Them By Linda Marie Pearson, CPA, CFE A private conversation among board members seems to contradict the openness and transparency expected of today’s nonprofits. Managed appropriately, however, executive sessions are a vital part of the board process. An executive session is essentially a meeting-within-a-meeting — a special closed session of the board in which more candid, confidential conversations can take place. It may take place before, in the middle or at the end of a regular board meeting. An executive session is exclusive to board members. Others, such as the chief executive, select senior staff members, outside advisors (i.e. lawyers, auditors, consultants) may be invited to join for part or all of the session. It’s important to note that an executive session is different from a meeting of an “executive committee.” Usually composed of the chief executive, officers and committee chairs, an executive committee typically meets only in emergencies, although some meet more regularly and are charged with handling business between regular board meetings. When an executive committee meets, it is not called an executive session. Strengthening Governance and Leadership Properly called and conducted, executive sessions serve three core functions: They assure confidentiality. Some organizational matters legitimately require confidentiality. For example, certain discussions with legal counsel are subject to attorney-client privilege. Likewise, the board and executive director may wish to hold a discussion of strategic business decisions privately — before sharing details with the organization’s various stakeholders. They foster board independence and oversight. Executive sessions encourage nonprofit boards to “think for themselves” in such critical areas as determining executive compensation, evaluating senior staff performance and having open conversations with their auditors without management present. They enhance relationships among board members and with the chief executive. Executive sessions provide an opportunity for peer-to-peer discussion of issues and concerns between the executive and board without staff present. This helps foster a more constructive partnership between the board and chief executive. Playing by the Rules If not handled properly, an executive session can create the notion that “something is wrong” or that the board is somehow going behind the back of the chief executive. The key is to establish formal procedures for calling an executive session, clearly communicate the intent of such a session, and then appropriately document it. Following these simple steps can help diffuse the perception that executive sessions are convened only in times of crisis or to deal with matters involving the chief executive. Establish policy. Typically, the board chair has the authority to call an executive session. Some boards require that a majority or super majority confirm the decision if an executive session is requested by a board member other than the chair. Consider establishing a board policy that articulates the process for calling and conducting an executive session. This includes identifying issues that are acceptable for closed meetings, such as: On the advice of counsel To discuss current pending legal matters To consult with the auditors and compensation consultants To acquire or dispose of property To discuss or act on personnel issues To address such other matters as the board deems appropriate. Utilize appropriately. The majority of board business should be conducted in a traditional board meeting. Executive sessions should be reserved for cases where frank, open discussion is needed. Wherever appropriate, the board should officially return to an open meeting for a formal vote — especially for critical decisions such as determining executive compensation or settling contract disputes. Document accordingly. The fact that an executive session was held should be clearly documented in the regular board meeting minutes – including when the board went into executive session, the primary purpose of the session and any formal decisions that were made. Detailed minutes may not be necessary if the executive session resulted in only an informal discussion, but the general substance of the executive session should be noted in the board minutes. If the session contributed to a formal board decision, it may be necessary to provide further documentation in the minutes. If the chief executive was not present, the board chair should promptly summarize the gist of the session for the executive. Ensure confidentiality. Participants in an executive session should be made aware of what parts of the discussion should remain confidential. Also, access to executive session materials or minutes should be limited to those persons who participated in the executive session, as permitted by law. Of course, if your nonprofit is subject to open meeting or sunshine laws, make sure that executive sessions are in full compliance. Consider making them a regular agenda item. Some nonprofits make executive sessions a regular part of their board meetings. The board meets privately for a time with the chief executive and then conducts a debriefing without the executive. This helps bring conversations that would otherwise happen in the parking lot into a collective forum. Executive sessions are a valuable tool that can create an environment for important conversations among board members — sometimes alone and sometimes with the chief executive. If you have any questions, please contact me at firstname.lastname@example.org or 401-752-0566.