Are You Holding Executive Sessions … Regularly?

Are You Holding Executive Sessions … Regularly?
By Tim Harrington and Kevin Smith

At times directors should meet without the CEO or others present. This is an opportunity to raise questions or concerns in a closed environment. This session allows the board to maintain independence from senior management. Done regularly it is part of the culture. Done too rarely and it creates concerns.

Executive sessions or closed meetings, are an opportunity for the board to meet confidentially, with only board members present. Though the board may choose, or not, to invite others to attend.

Executive Sessions

Executive (in camera) Sessions

*For the folks out there who are nerdy about language like me, these sessions are also called in camera (literally in a chamber) sessions. Our good friend Latin rearing its head here. And I think it may be obvious why that may be a very confusing term that is no longer used in this day and age of viral video and smart phones with cameras, especially since we’re referring to a meeting that is closed. – Kevin

We believe you need the Executive Sessions. Periodically and routinely. The board needs the opportunity to have confidential environment, where only directors are present, so that people can speak freely. This may be about board challenges or governance issues, CEO compensation, or performance. It may concern the auditor’s report, or it may simply happen regularly to reinforce the idea that the board is independent of management and that there will be a place to express concerns.

The executive session is increasingly common in credit unions. That’s a good thing. But it is remains, at times, contentious. In our experience, if it iscontentious, it is usually the CEO who finds it troubling.

Employer of the CEO

Remember board members, as individual directors, you are colleagues of the CEO, but collectively you are the employer of the CEO. Do employees attend every meeting the CEO has as an employer? No, of course not. Then why should a CEO expect to be present at every meeting of his or her employer? It is vital for every business run in the public trust to have a proper balance of power. An executive session can help maintain that proper balance of power.

We didn’t invent the executive session ourselves; we incorporated it after learning it from others, researching and testing it. It works.

BusinessWeek’s Annual Corporate Board Survey once listed one of the eight characteristics of worst boards as follows: “holding NO meetings without management present.” CUNA’s Credit Union Directors Newsletter has indicated that, “Boards should meet regularly without management present and should evaluate their performance every year.” Many board consultants and governance experts recommend it.

Balance of Power

If the CEO is always present at board meetings, then there is a question of who’s really in control. The balance of power between the “amateur,” “part-time” board and the “professional,” “fulltime” CEO is thrown off. It is important for the board to exercise its independence from and senior position over management. When the line is blurred as to who is in charge in any organization, including credit unions, the effectiveness of the three legs of governance (the board, management and the supervisory committee) is weakened.

The purpose of holding the executive session several times a year is to exercise independence from management. It is to say, “Are there any issues we as a board need to discuss without the management team or CEO present?” This is a good time to discuss issues among directors and resolve them among the board. Sometimes it is as simple as a board member with a concern who has been afraid or felt intimidated and thus remained quiet. Usually you can resolve these things in this private meeting and never arise again. Yet other times, this single board member may have identified something significant. With that, the board can then present it to the CEO and ask for discussion and hopefully get resolution.

Let’s be very clear though: this is not a “get the CEO” meeting, it is not a gossip meeting, and it should not be a very long meeting (15 minutes unless there is something substantive). It is a place to candidly ask whether there is anything else to discuss, any red flags that are troubling, etc. It’s also not necessarily negative. And after the meeting, give the CEO a rundown of what you discussed. Minutes should be short and vague.

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