31 October 2016 by Simon Osborne
Our guidance has to reflect all ICSA members, says Simon Osborne
It is rare that we are contacted by the press wishing to discuss any of our excellent library of guidance notes – indeed, we generally wish that they were more interested in governance issues than they are. However, we found ourselves in the unusual position of fielding such questions when the Rt. Hon Andrew Tyrie MP, Chairman of the Treasury Select Committee, wrote to me describing our guidance on minute taking as ‘inadequate’.
Mr Tyrie is, rightly, concerned about how dissent is recorded in minutes. I agree with him that this is important, but where we differ is around the distinction between dissent and the robust discussion that is a feature of many of the board meetings I have attended.
Our guidance is clear that the minutes of a meeting should include details of decisions made, the reasons for them, actions arising if applicable and the key points of the discussion. These should be recorded in sufficient detail to enable someone not at the meeting to understand not only what decisions the board made but why it made them. Subject only to the need to be balanced, that summary of the discussion will, inevitably, include coverage of material challenge.
The feedback received from ICSA’s consultation on minute taking shows that the overwhelming majority of board decisions are reached by consensus. Responsibility for a company rests with its board and non-executive directors have a particular duty to play an active role in challenging the risks that businesses are running and the way in which these are being managed.
There may well be a number of views expressed in discussion which may, or may not, form part of the collective decision. The discussion is an important element of the board decision-making process and will often include constructive challenge of management. That is different from dissent, which ICSA believes should be, and has been told is, rare in board meetings.
A director may well express differing views during a discussion that ultimately results in unanimous agreement, but it is important to distinguish between this and a situation where a director feels the need to disagree publicly with the final decision. Given the collective responsibility of a unitary board, ICSA believes that there should be a high bar before this happens – it is not something that directors take lightly.
ICSA therefore believes it entirely appropriate that directors be asked to confirm their formal disagreement with a decision before that dissent is recorded. The guidance also clearly states that a chairman can direct that a director’s dissent be recorded, even where an individual does not make a request for their dissenting view to be noted in the minutes.
The Select Committee is exercised in particular about the failure of HBOS. The Chairman rightly noted in his letter to me that ‘Clear and accurate board minutes are essential. When companies fail board minutes can and should be thought of as “black boxes” from which information can be gleaned to help prevent a repetition of mistakes.’ He says that the Committee’s specialist advisers had found that HBOS’s board and committee meeting minutes ‘were frequently not sufficiently full to provide a definitive record.’
I cannot, of course, comment on minutes which I have not seen of meetings which I did not attend, but if, as the report to Parliament seems to suggest, there was no record of challenge in the board minutes and yet individual directors are now arguing that they disagreed with decisions taken by the board of which they were a member, my question would be why they did not insist at the subsequent meeting that the minutes reflect their dissent.
I disagree with the assertion that our guidance is inadequate, or that it fails to recognise developments in the past 10 years. The guidance has been informed by, and developed in response to, feedback from more than 100 governance practitioners who deal with these issues on a day-to-day basis for boards of all sizes in sectors − ranging from charities, NHS Foundation Trusts, sporting bodies and academy trusts, to SMEs and major corporates.
Although the financial crisis has undoubtedly changed the landscape for large financial institutions, the guidance has to reflect the requirements of the full gamut of ICSA members and we are confident that it accurately does so.