Reasons for Conducting an Open Board Meeting

The board meeting is the main form of decision-making for the board of directors. This article will explain the purposes and reasons for an open board meeting.

The purpose of the board of directors

The board of directors helps companies grow and develop at the business’s pace – without slowing down and at total capacity. Plus, the board of directors and corporate governance also solves the owner’s tasks – it helps him minimize his presence in operational management. All companies need corporate governance, but not all companies need it in the same way. There is no single, standard corporate governance model for all, although the challenges for companies are the same:

  • the need to attract funding;
  • the need to maintain and expand market share;
  • risk and innovation management;
  • creation of a sustainable system that allows the company not to depend entirely on the personality of its founder.

Reasons to organize an open board meeting

The board of directors’ main organizational form of work is a meeting. The chairman of the council convenes it:

  • On his own initiative;
  • At the request of a member of the board of directors (even one);
  • At the request of the audit committee (auditor);
  • At the request of the auditor;
  • At the request of the executive body (any – both individual and collegial);
  • At the request of other persons determined by the company’s charter (for example, shareholders who own a certain block of shares).

The term convening, the frequency of meetings, and most other issues related to the procedure for convening and holding meetings are not defined by law; it is the prerogative of the company’s charter or special internal document (for example, the Regulations on the Board of Directors). Nevertheless, the efficiency and rationality of the board of directors presuppose regular meetings.

Competence of the board of directors in the open board meeting

Open meetings of the board of directors are held as necessary and are considered valid if at least 5 of its members are present. The main burden of organizing the board of directors’ activities rests with the head of this governing body.

Open board meetings can be held both in person and in absentia; however, the possibility of board decisions by absentee voting should be directly discussed in the statute or internal document. In addition, the determination of the quorum and the results of the vote may take into account the written opinion of a member of the council absent from the meeting, but also only if it follows directly from the statute or internal document.

Each member of the Board of Directors has one vote in resolving issues; the statute may provide for the right to a casting vote of the chairman of the board, but only in the event of a tie between the board of directors. We emphasize that the law refers only to the chairman of the board of directors; therefore, if another person performs the functions of the chairman of the meeting, he may not be given the right to a casting vote. Finally, the personification of the functions of the general management of the company and the associated personal responsibility of each member for the results of their actions (inaction) prohibits the transfer of voting rights by a member of the board to another person including another member. In addition, minutes shall be kept at the meeting, which shall be finalized no later than three days after the meeting.