What is a Board Meeting?

A board meeting is a formal meeting of the board of directors of a company which is usually held at periodic intervals during the financial year to discuss and ratify various present and future policy issues and actions.

What Makes a Board Meeting?

The directors that comprise a board usually consist of both internal stakeholders and external or independent directors. Internal stakeholders include representatives for equity shareholders and preferred shareholders. Directors representing equity shareholders are usually the founders of the company while representatives of preferred shareholders include lead investors of the company. The independent directors consist of market experts who represent the company’s interest and do not hold any stock in the company

Board Meeting Procedures

Quorum

All members of the board usually attend the board meeting which is presided by the chairperson of the board. If the chairperson is not available, his nominee takes his place and chairs the meeting. Similarly, even if all the board members are not present during a meeting, resolutions can still be passed as long as there is a quorum.

A quorum is said to be present when a minimum number of board members (as prescribed in the Articles of Association) are in attendance. If the Articles do not stipulate a quorum, then a simple majority of the directors in attendance is also enough to pass resolutions.

Note that all board members, irrespective of whether they were present at the board meeting or not, are bound by the resolutions passed at the meeting under the concept of Doctrine of Collective Responsibility.

Board Meeting Minutes

All board meeting deliberations must be recorded in the minutes of the meeting. The minutes are usually recorded by a secretary. The first order of business in a board meeting is to ratify the minutes of the previous board meeting.

Ratification of the minutes is important since it gives the board a chance to verify whether all the issues discussed during the previous meeting have been properly captured and documented. The minutes are also a good indicator of the efficiency and effectiveness of the board.

Passing Resolutions on Corporate Actions

Once the minutes are ratified, the board members then proceed to deliberate on any unfinished agenda from the previous meeting. The board also analyzes the past performance of the company by reviewing performance indicators such as sales growth, profit growth, market share, debt to equity ratio and so on. The members deliberate on the various ways to improve performance and growth including investment in research and development, marketing, expansion into new markets, and divestment of unprofitable ventures.

Other management-related issues discussed in a board meeting include hiring and firing of senior executives, strategies to improve employee productivity, distribution of profits to shareholders, and the like. Based on the various strategies and action points discussed in the board meeting, the board members pass resolutions recommending and approving plans of action for the management to implement.

Board Meeting Example

ABC plc is a public limited company engaged in the manufacture and sale of Fast Moving Consumer Goods (FMCG) products across the United States. As per the company’s bylaws, the company has to have a board meeting every quarter. The company’s board consists of seven members, two of which are the Chief Executive Officer and the Chief Financial Officer of the company. The rest of the board members include the promoter, one angel investor, and three independent directors who are industry experts in marketing, finance, and supply chain management.

When the board met over the last quarter of 2019, one of the primary agendas was to discuss ways and means to improve the sales in the mid-west region. It was found that despite sufficient demand for the product, goods did not reach the retailers on time leading to low sales. The problem was with the distribution network in the region as the company lacked a local presence. The company did not have stockists or distributors which led to the irregular and ineffective supply of the product. The board deliberated the issue and recommended that the company should enter into a contract with local distributors in the region and ensure at least a month’s supply of the company’s products in the distributor’s warehouse.

This suggestion by the board, when implemented, would help increase sales in the mid-west region.

Board Meeting Analysis

The powers and responsibility of the board are laid out in the company’s bylaws. The board meeting must be conducted as per the procedure laid out in the bylaws in consonance with any other rules that the board itself might have agreed upon. The bylaws also provide details regarding the minimum and the maximum number of board members, election procedure, and the frequency of board meetings.

Board meetings are conducted to oversee the affairs of the company periodically. The board has the responsibility to oversee the business of the company, review past performances, initiate future strategies, and drive them to action. In effect, the board members have a fiduciary responsibility to the company and its shareholders. Decisions regarding executive hiring and compensation, dividend policies, corporate acquisitions and divestment, and resource management fall under the purview of the board and its members.

Board Meeting Conclusion

To sum up:

  • A Board meeting is a formal meeting of the board of directors of a company which is held at periodic intervals during the financial year to discuss and ratify various present and future policy issues and actions.
  • Some of the issues that are discussed in a board meeting include executive hiring and compensation, dividend policies, corporate acquisitions and divestment, and resource management.
  • Board members usually comprise promoters, angel investors, the company’s top management team, other major shareholders of the company, and independent directors who are usually industry experts with no stake in the company.
  • Some of the salient features in a board meeting include the need for a quorum, recording and ratification of minutes of the meeting, deliberation and passing of resolutions on various external and internal company issues, and recommending plans of action to the company’s management team.