Even the most conscientious and reasonable directors serve with the possibility of facing a lawsuit in state or federal court. In the decade after Sarbanes-Oxley, board minutes have emerged as an important litigation tool for both the prosecution and the defense. While minutes continue to be essential to internal recordkeeping, they must also be crafted to stand up to judicial scrutiny if needed.
Incomplete or inadequate minutes can serve as the basis for prosecution for obstruction of justice, and some have expressed concerns that minutes may act as road maps for litigants. Minutes that fail to show due diligence in a board’s decision-making process reflect either poor minutes or poor process—both can be detrimental to directors defending themselves from liability. On the other hand, minutes capable of demonstrating the process behind well-informed board decisions, may be key evidence in any board’s defense. Directors should not fear “beefing up” minutes with details from meetings if they are doing their jobs competently.
With few formal rules surrounding the drafting of board minutes, directors may receive conflicting guidance on how to best represent board meetings. The National Association of Corporate Directors, with input from the Society of Corporate Secretaries and Governance Professionals, has put together a white paper outlining five board minute fundamentals. These fundamentals, based on a study of various recommendations, should serve as a framework for directors to review, interpret, and eventually approve the minutes. This white paper gives directors a firsthand look at full board and committee meeting minutes. A complimentary copy of Corporate Board Minutes: A Director’s Guide is available to all members.