Corporate Directors Forum  E-Alerts

"GUIDELINES FOR BOARD OF DIRECTORS REGARDING INTERNAL COMMUNICATIONS"

GUIDELINES FOR BOARD OF DIRECTORS REGARDING INTERNAL COMMUNICATIONS

The following is a brief summary of “best practices” for good corporate governance for a Board of Directors, in the area of internal communications with the corporation’s CEO, management team, and employees.

1. CEO-Directors Communications. A principle responsibility of the Board is to provide oversight and guidance to the CEO, as the CEO implements the corporation’s policies and business plan. The Board is to help the CEO and corporation succeed, and to prevent the CEO and the corporation from taking inappropriate actions. In order to accomplish these Board responsibilities, the Directors need to be kept fully informed by the CEO of significant factual matters concerning the corporation, and the Directors need to have good communications with the CEO concerning any questions, problems, concerns, and issues. Such communications generally occur as part of formally scheduled Board of Directors meetings; but Directors should feel free at anytime to communicate with the CEO, and vise versa. If the CEO believes there is any lurking problem or issue, the CEO should promptly bring this to the attention of the Board. Similarly, if any Director believes there is any lurking problem or issue, the Director should promptly communicate this to the CEO.

2. Employees-Directors Communications. While most employee communications with Directors concerning corporation matters should be via the CEO, there should also be general a policy and practice permitting and fostering open communication between Directors and the corporation’s management team employees. However, such Director-employee communications generally should follow the following process and guidelines:

(a) Such communications should be in the nature of the Director being a “good listener” as to what the management team member has to say concerning factual matters, concerns, or questions; and with the Director asking relevant questions and seeking relevant information from the management team employee. However, the Director generally should not say anything to the management team employee which might be interpreted by the management team employee as “giving instructions” to the employee to do something, or “telling the employee how to perform his job,” or “describing Company policy.” In order to maintain efficient, effective and proper lines of communication between the CEO and the management team and other employees, communications on behalf of the corporation to the management team and other employees should be through the corporation’s customary lines of communication, with the CEO being fully aware of and supportive of any communications concerning the corporation’s management matters.

(b) The corporation should have a general policy and practice to the effect that if a Director receives any substantive communication from an employee, the Director should report that to the CEO for general information purposes, and to get the CEO’s “side of the story.” Similarly, if a Director wants to initiate a contact with employee concerning a corporation matter, it is customary and appropriate for the Director to keep the CEO informed of such contacts. Special treatment is warranted if there is any employee communication which is negative about the CEO. In such a case, the Director should discuss the matter directly with the CEO, although there may be some special circumstances which warrant the Director doing some additional factual investigation before discussing the issue with the CEO. Any such matter should be promptly brought to the attention of the Chairman of the Board, and ultimately to the full Board.

(c) Key ingredients for a well run and properly functioning corporation are to have open communications, prompt and frequent communications, and a full understanding of the relevant facts and circumstances, among the Directors, the CEO, and the management team. Most corporations find that this goal can best be achieved if communications go through the normal channels for communications. Most corporations find that it is not an effective use of a Director’s time to become involved with employee communications concerning operational matters unless and until there has been input on the topic from the corporation’s CEO and/or management team.

3. Executive Session for the Board. The Board should strive to have an “Executive Session” meeting of the outside Board members (excluding the CEO) on a periodic basis, preferably at the end of each regularly scheduled Board meeting. Topics to be discussed in an Executive Session generally should be limited to sensitive matters concerning the CEO, rather than to the corporation’s operational matters for which the full Board (including the CEO) should be involved in the discussions. Very soon after the Executive Session, a designated Director should give the CEO an oral summary of the matters discussed in the Executive Session.

4. Regular Board Meetings. The Board of Directors should meet on a regular schedule (e.g., at least quarterly), and in special meetings when the need arises. Directors are encouraged to have communications between and among themselves even outside of the scheduled Board meetings; but Directors should take care to avoid any perceptions that some small group of Directors are making decisions without the benefit of the topic being presented, considered and discussed at a full Board meeting.he

Provided By:
Knox Bell
DLA Piper