HAHN AGENCY, INC.

Actions By Directors

Any action taken by directors must be an informed decision following a thorough, well documented investigation of all relevant facts reasonably available and applicable law.

This page is broken down into the following sections:

Procedural Considerations. top

The board should periodically review and agree upon various procedural issues relating to board meetings, including the frequency and scheduling of regular board meetings, the timing and content of notice of meetings, and the persons other than directors who should attend the meetings.

Attendance at board meetings is imperative to keep directors informed and to provide the directors with the opportunity for meaningful input into the decision making process. Accordingly, both regular and special board meetings should be scheduled with a view towards maximizing attendance. Regular meeting dates should be established and communicated to the directors well in advance, preferably at least as a full year schedule. Special meetings should be scheduled only after the directors have been polled to determine their availability at one of several times and the directors should be notified of the selected date as early as possible.

• Try to ensure attendance by giving fair warning.

• Regular schedule should be maintained.

Although no one other than the directors has a legal right to attend a board meeting, officers or other key members of management should either be invited to the meeting or instructed to remain available if needed during the meeting. Employees and outside advisors, including lawyers and accountants who have been involved in, are knowledgeable about or consulted in connection with a particular transaction under consideration by the board, should also either attend the meeting or remain available as needed.

• Make sure they are available, if needed.

Although the quantity of time spent on a particular decision does not necessarily equate to quality of time, it is important to schedule adequate time for directors to completely analyze and discuss the matter under consideration. Discussion should not be arbitrarily terminated and no director should be deprived of an opportunity to question any aspect of the decision.

• Do not "rush" meeting.

Presentation of Information. top

Adequate information concerning all important matters requiring board attention should be distributed to the board in time to permit a review of the information before any vote is taken. Procedures should be implemented by the board to assure that sufficient information is disseminated in a timely manner.

For regular board meetings, a detailed agenda, sufficient background information, and copies of the minutes of all committee meetings and minutes of the previous board meeting should be distributed to the directors approximately one week in advance of the meeting, although less time may be required in rare emergencies. For special meetings, circumstances usually will not permit as much advance notice or planning. However whenever possible, information should be provided to directors before the meeting even if expensive courier service is required.

• Provide relevant information to directors before the meeting
  

If advanced dissemination of information cannot be achieved, adequate time should be set aside at the meeting to permit directors to review and understand the information presented. If for any reason a director has not received sufficient information or time to evaluate the information, action by the board should be delayed until the information is made available in a timely fashion.

• If information cannot be provided beforehand, leave enough time for board members to review and evaluate the information.
  

The information distributed to directors should include, where available, written reports or memoranda from management which describe the subject transaction and which set forth management's recommendations and the reasons therefor. In addition, copies of the operative documents (e.g. merger agreement, contract, letter of intent, etc.), and executive summary of the documents, if they are particularly long, complex or technical; written reports from outside advisors and proposed resolutions relating to the transaction should also be distributed in advance.

• Make sure that information is complete and all supporting information is provided.
  

A director should carefully and critically analyze these documents prior to the board meeting. Directors should plan on devoting a sufficient amount of time in preparation for each meeting to become conversant with the matters presented for consideration.

• Directors should read information and prepare for meeting.

Conduct of Meeting.  top

Board meetings should be conducted in an unbiased manner For example, the board chairman should remain neutral as much as possible and encourage open discussion.

• Board Chairman should be neutral.
  

It is essential that directors be provided ample opportunity to actively question and challenge management and outside advisors in connection with the transaction. The purpose of the meeting is not so much to act as a single unit but rather to exercise a healthy skepticism towards the proposal and to hear different viewpoints and ideas. Directors should demand and the management should facilitate the existence of such an environment. Unchallenged reliance upon management recommendations subjects directors to potential liability.

• Environment should be open to critical discussion of item. No "rubberstamping"
  

Inevitably not all directors will ultimately agree with the board decision. The dissenting director must affirmatively vote against the proposal if a legal defense based upon such dissent is to be established. Mere abstention from the vote is deemed by the courts to be tantamount to approval of the transaction.

• Not voting for item is same as approval of item.

Documentation.  top

Maintenance of accurate and complete minutes of all board and committee deliberations and other documents relating to director or officer conduct is one of the most important and most frequently neglected areas of loss prevention. At a minimum, board minutes should document the matters discussed, record any instructions given to management, and set forth any resolutions passed, actions taken or other decisions made. The following are some fundamental principles which should be considered when preparing minutes:

• Minutes should clearly and concisely set forth exactly what action occurred at the meeting, including any limitations placed on the action taken or authority granted and any conscious decision not to act.

• Minutes should describe what matters were considered and discussed and what authorities were relied upon in reaching the decision of the board.

• If documents are incorporated by reference or attached to the minutes, they should be clearly identified in the minutes themselves.

• Minutes should be reviewed prior to their finalization not only by the directors, but also by legal counsel.

• Minutes should reflect the results of any vote taken and identify by name all directors who voted against an approved transaction.

Directors should carefully review not only minutes of meetings which they attend, assuring themselves that the minutes accurately document what transpired at the meeting and the individual's participation therein, but also the minutes of any meeting which they did not attend. If the absent director dissents or disagrees with actions taken at the meeting, the objections should be placed in writing and submitted to the board for their information and for filing in the organization's minute book.

• Directors should keep records of meeting NOT attended.

All documents prepared by or relating to directors and officers should be prepared with the expectation that the document will be closely scrutinized in the future for evidence of wrongdoing. Imprecise wording, inflammatory or vulgar phrases, and ambiguous language should be avoided. A document which appears innocent when prepared may appear quite differently when read in a different context at a later date.

• Language of records should be clear.
  

The main thing to remember is be consistent in your planning and conduct of the board meetings. Using the above recommendations makes sure there is a "paper trail" for defense against claims made against the directors and officers.

Organization Loss Control

  Back to Directors & Officers Report Main Page 

Health Insurance/Medical Savings Accounts Homeowner's/Auto/Life/Directors and Officers/Convention Cancellation/Request A Quote/Companies/About Hahn Agency/Customer Service/Home