• Thursday, June 13, 2024
businessday logo

BusinessDay

The Nigerian Code of Corporate Governance Principle 10: Meetings of the board

Nigerian Code of Corporate Governance 2018 (Principle 17): Risk management

“Meetings are the linchpin of everything. If someone says you have an hour to investigate a company, I wouldn’t look at the balance sheet. I’d watch the executive team in a meeting for an hour. If they are clear and focused and have the board on the edge of their seats, I’d say this is a good company worth investing in,” Patrick Lencioni

For the effective discharge of its oversight and leadership roles, the Board of Directors is expected to meet regularly to deliberate and take decisions on key issues. Principle 10 of the Nigerian Code of Corporate Governance, 2018 (NCCG) provides that “Meetings are the principal vehicle for conducting the business of the Board and successfully fulfilling the strategic objectives of the Company.”

The Companies and Allied Matters Act, 2020 (CAMA, the Act) allows Directors to regulate their meetings as they think fit. The Act provides that the first meeting of the Board must be held not later than six months after the incorporation of the Company. The NCCG recommends that the Board meets not less than once a quarter.

According to CAMA, every director is entitled to receive notice of a Board meeting at least fourteen days before the meeting. The Company of course can by the Articles of Association fix a shorter notice period. Failure to give adequate notice to all Directors entitled to receive the notice shall invalidate the meeting. Where the exigencies of the business require that a meeting be convened with less than the statutory (or as fixed by the Articles) notice, each Director shall be required to waive their right to notice by expressly signing off a waiver form.

Every Director is required to attend all Board meetings and such attendance record of Directors should be included in the criteria for re-election of Directors by members at the general meeting. Where a Director is unable to attend, he/she must send prior notice, stating the reason for such absence to the Chairman or the Company Secretary. It is good practice to agree annual meeting dates in advance to give Directors the opportunity of blocking off Board meeting dates in their diaries. Directors are expected to prepare appropriately for Board meetings and as such should receive Board Packs in good time to ensure they participate effectively.

Directors reach their decisions by resolutions usually arrived at by consensus. However, whilst consensus is the norm, those Directors with divergent views should be encouraged to share these. Boards tend to waste too much time trying to achieve consensus and shy away from voting. Where there is sufficient dissent with respect to a significant issue, the chairman should step the matter down for further consideration and should not hesitate to call for a vote if the matter requires urgent attention. Each director is entitled to one vote, regardless of shareholding. The chairman shall have a second or casting vote in the case of an equality of votes.

Where it is not possible to have physical meetings with all the Directors present, resolutions can be passed via written resolutions signed by all the directors. To give effect to “round-robin” resolution, all (rather than majority) of Directors have to accent to the decision being taken.

Given that meetings are integral to the overall performance of the Board, care must be taken to ensure optimisation. As such, meetings must be properly and carefully planned and conducted to achieve desirable outcome and avoid unproductive time-wasting sessions.

Read also: Nigerian Code of Corporate Governance 2018: Principle 9 – Access to Independent Advice

The robustness of deliberations and the quality of decisions taken at Board meetings are dependent on the adequacy of information presented to the Board. The Board should provide clarity as to the type, format and frequency of Management Reporting. Reports should be crisp, precise and straight to the point.

The chairman is responsible for coordinating the proceedings and ensuring that the meeting objectives are met. In performing this role, he/she must ensure that members have a clear understanding of the items for consideration. The chairman should ensure that deliberations are inclusive and not dominated by an individual or a group (caucus).

For Board meetings to be effective, the chairman must elicit diverse views whilst guiding the Board to a collective decision. Reticent or silent Directors should be encouraged to contribute to Board deliberations to ensure the Board gets the benefit of the diversity of its composition.

Rather than something to dread, Board meetings should be interesting. The chairman should ensure that the agenda focuses on strategic issues and not mundane operational matters. The chairman in working though the agenda and allowing Directors to contribute, should be mindful of properly pacing the meeting to ensure that Directors do not spend the whole day at the meeting. It is not out of place to call for occasional breaks to ease tension or just to allow Directors refresh.

A bye product of a Board meeting is of course minutes of meeting prepared by the Company Secretary. Minutes serve as the official record of Board deliberations that can be referred to in future by the Board, Auditors, regulators and consultants. Minutes must be clear, concise, accurate and objective. The NCCG Code recommends that minutes of Board and its Committee meetings should be prepared and sent to Directors on a timely basis. Such minutes should be formally reviewed and approved by the Board or relevant Committee at its next meeting.

Directors stand in a fiduciary relationship towards the company and shall observe the utmost good faith towards the company in any transaction with it or on its behalf. They are therefore expected to devote such time and attention as is necessary for the proper performance of their duties as Directors. Attendance and effective participation at Board meetings are crucial to the performance of a Director’s responsibility to the company, the effectiveness of the Board and by extension the success of the enterprise.