Throughout the pandemic, we all got accustomed to holding virtual meetings as a necessity, but recently I have received a number of questions from clients about continuing to hold virtual or hybrid board meetings or whether they should be encouraging more fully in-person meetings to the extent practicable. This is definitely a discussion that a number of companies are having as we try to move back to more in-person activities. There are, of course, pluses and minuses to the ability to use Zoom, Teams and other similar technology to meet with colleagues, but I believe the conversation should focus on the most effective way to hold a meeting of the Board of Directors, such that the Board properly engages with management and is diligent in exercising its fiduciary duties.
Having attended a number of virtual meetings recently, there are certainly positives. The meetings can be easier to schedule and attend on shorter notice with reduced travel and consequently reduced time commitments by attendees. This is extremely important for companies operating globally or with directors that are located in geographic regions different from the company’s management. This also usually means reduced costs as companies generally reimburse non-employee directors for their airfare, hotel and other related travel expenses. In-person meetings also generally are longer, often running for a full day or more and involving dinners or lunches. Shorter meeting times and time commitments mean the Board can meet more frequently if necessary and have shorter sessions on specific issues or topics rather than needing to devote days to quarterly or semi-annual meetings. It also makes it easier to bring in outside advisors without the expense of such advisors committing to travel and attend a whole meeting when only needed for a segment of the meeting.
However, there are a couple of big negatives that I see from virtual board meetings (which are not necessarily unique to a Board of Directors, but the concerns are heightened as a result of a Board’s duty of care in exercising oversight over the corporation.). The Board’s duty of care requires that it engage in reasonable diligence in evaluating actions to be taken by the corporation and make careful, informed decisions. To do so, the Board needs to be actively engaged in the process of evaluation and decision-making. While the directors are attending a meeting virtually, are they all actively participating? Are cameras on and everyone focused on the meeting, or are Board members multi-tasking or being distracted by other matters in their environment (the ones we all have working from home like children, dogs and ringing doorbells)? Is the meeting structured to allow directors to question management and ask for more information, or is the virtual setting making it more of a PowerPoint presentation followed by a rubber stamp by the Board? What materials did the Board review and consider, and when are they being provided? Was there sufficient time for the Board to gather the requisite information and deliberate? Are the Board members meeting before and/or after the “official” meeting in executive session or informally?
An important part of a functioning Board is that the Board members have good interpersonal relations and trust one another. This is much harder to do when meeting virtually. Without the time before and after the meeting and during breakout sessions, there is less time to get to know one another or to have sidebars or other important discussions between and among specific members of the Board or between a Board member and management. You also lose the dynamics of being around one table together where eye contact, body language and even where people are seated in relation to each other can impact discussions. This could be a positive or a negative – maybe some Board members feel more comfortable speaking up in a virtual setting, but you lose the ability to really control the dynamics when, for example, a particular Board member might be monopolizing the conversation or time allotted for a meeting or topic or being disruptive to the flow of the meeting.
The bottom line is that virtual or hybrid board meetings are probably here to stay, so it is important to set some guidelines. Meeting materials should be sent out far enough in advance that directors have a chance to review, digest and ask for additional information. The Board should consider a pre-meeting, even if it isn’t an in-person dinner, the night before the board meeting. This allows the Board to not only become more familiar with each other but also for Board members to raise issues in advance of the meeting and provide focus and direction for the discussions at the actual meeting – it is a time for the Board as a group to formulate important questions or issues they want to highlight for management. Given that virtual meetings tend to have a shorter time span, it is important to make sure the time is used wisely. At the meeting, there should be a clear agenda, and Board members should be instructed to keep cameras on if possible, as this will help with engagement. Board members should be strongly encouraged to ask questions and actively participate in discussions. The meeting should be structured to be just as interactive as an in-person meeting, and there should be time afterward in executive session or otherwise for board members to debrief on the meeting and plan and prepare for what issues need further discussion and evaluation between one meeting and the next. Companies might also consider alternating between virtual and in-person meetings or at least holding one or more regularly scheduled quarterly or semi-annual meetings in-person to the extent practicable and reserving the virtual meeting setting for special meetings on specific topics. The most important thing is that a company makes sure its Board is functioning in a cohesive and productive matter that has everyone rowing in the same direction in the best interest of the company and its stockholders.