When the audit and risk committee (ARC) met in camera before the formal start of the meeting, a director made clear his frustration with the CFO’s continued tardiness in providing information the committee had requested. With an audience of only his colleagues, the director’s language was blunt and uncompromising. Management was invited into the room and at the appropriate item in the agenda, the chair called for questions from the committee. The disgruntled director took his chair’s cue and spoke up. But this time, his question to the CFO was polite, but firm. The message was clear, but the language he used meant his relationship with the CFO — and by extension, the CEO — stayed intact, while still conveying the expectation of a speedy response.
Sessions held in camera are being more widely used in the listed and not-for-profit sectors as a means to maintain and improve good governance practices and decision-making on boards and sub-committees. The term in camera means to meet confidentially, and in private. It derives from the Latin and means “in a chamber”.
AICD Director Tools’ Meeting Effectiveness says the inclusion of an in-camera session in the agenda allows non-executive directors to raise or explore issues of concern or clarification prior to the meeting without the presence of management. It’s good practice for the in-camera session to be a standing item on the agenda. This means it becomes a habitual part of the board’s business and signals to directors there will always be an opportunity to raise sensitive issues with colleagues. A routine in-camera session helps remove any potential management anxiety or mistrust.
Boards are not obliged to hold sessions in camera. However, there are benefits of holding a session in camera at the beginning and at the end of a board meeting. A private, independent director-only session at the beginning of a board meeting is an opportunity for directors to regroup from the previous board meeting and ask the chair for time on the agenda to raise specific issues or for discussion. This session is primarily administrative, and the chair and the directors overall should be careful not to stray into topics that should otherwise be discussed in the open board meeting, in the presence of the CEO and the senior executive team. A certain amount of discipline should be exercised.
The in-camera session at the end of a board meeting starts once the executives have left the room. This second in-camera session can be used by directors to discuss issues ranging from the performance of the CEO and the executive team, problems with the implementation of the strategy or to gather feedback on how an issue on one of a board member’s other boards may impact on their portfolio overall. It should be a free-flowing discussion.
It’s good practice for the in-camera session to be a standing item on the agenda... it becomes a habitual part of the board’s business.
It’s not unusual for directors to speak in a less guarded manner when management isn’t in the room. The business of a board meeting — the responsibility to address governance, legal, regulatory and other business issues, and a constant flow of management presentations — lends itself to more formal interactions. When management isn’t in the room, directors have the freedom to express themselves more openly, which allows their colleagues to better understand their positions on various issues and work through those issues in private before expressing a view with management. Similarly, senior executives will determine issues among themselves before bringing a matter to the board.
The basic tenet of good governance practice is the separation between board and management. Each group has a different, but complementary, role to play. Ultimately the board is the boss and there are times when non-executive directors need time alone as a group for unrestrained discussion. A standing in-camera session as part of a board or committee meeting means the board is being open with management that these private sessions occur. The board is also less likely to “take an issue offline”, which can negatively affect the relationship with management and board.
As it transpired further to the audit and risk committee story, the frustrations highlighted by the director in the audit committee were symbolic of broader behavioural problems by the CFO. The CEO had been cognisant of the problems, but having the CFO’s behaviour elevated to board visibility exacerbated the issue and created a sense of urgency. Later, the CEO informed the board that the CFO’s employment was to be terminated. The news was met with no surprise.
Dr Ann-Maree Moodie FAICD is a board reviewer specialising in listed and NFP boards.