Most people get suspicious about the things they can’t see or hear. The financial crisis of 2008 and some bad headlines have made the general public more knowledgeable and observant than ever before. As a result, they’ve also become more skeptical than in past years. Nonprofit organizations were created to serve the greater good, so the public expects transparency and accountability. Regarding most matters, they have a right to it.
Balancing transparency with privacy and confidentiality can be a tough act for nonprofit boards. Board directors often experience some degree of inner conflict between serving the public good and fulfilling their duty of loyalty, which requires them to conduct board business in confidence.
Using executive session as an option for managing sensitive issues is a responsible way to find a reasonable balance between maintaining confidentiality and satisfying one’s obligations to the general public.
Do Informal Meetings Need to Be Transparent?
Over time, board directors develop relationships and friendships with each other. When they do so, issues about board business may come up during the course of conversation. Board directors need to be aware that they aren’t allowed to hold informal meetings for the purpose of discussing and predetermining a vote.
Board business isn’t always limited to the boardroom. Nonprofit board directors should be aware that informal gatherings are sometimes considered board meetings under the Sunshine Act or Open Meetings Act. Nonprofit boards that aren’t subject to the Open Meetings Act may be subject to requirements under industry regulatory bodies to hold meetings that are open to the public.
Boards must allow some access to the board’s information, but they don’t always have to allow general access to their meetings.
In case someone ever alleges that a board held an official meeting under the guise of an informal meeting, board directors need to be aware that the courts will make the final ruling on whether the meeting was an official one. In making a decision about whether a board meeting was conducted officially, judges will consider the setting of the meeting, the behavior of the board members, the content of the discussion and any future actions that the board members discussed.
Proper Use of Executive Session
When board directors need to discuss private or highly sensitive matters, the bylaws may allow them to go into executive session under certain circumstances. The board asks any non-board members present to leave at this time. Depending on the nature of the executive session topics, sometimes relevant experts, such as legal professionals, are allowed to remain in the meeting for an executive session.
A move into executive session may cause some people to be suspicious about the legitimacy of board discussions. This may be because members of the public may have a limited understanding of the board’s legal duties and their need to conduct parts of their board meetings privately. Because of the public’s lack of trust, boards should limit the use of executive session as much as possible.
According to Robert’s Rules of Order, boards may take votes during executive session.
How Boards Enter Into Executive Session
For a board to enter into executive session, a board director must make a motion and another director must second the motion. The board chair then declares they are entering into executive session and all non-board members are asked to leave the meeting space.
Acceptable Issues for Entering Into Executive Session
Common types of issues that warrant a move into executive session are:
- Sensitive and private matters about a member of the board or management
- Legal matters
- Land acquisitions
- Major business transactions
- Crisis management
- Chief executive performance and compensation
- Succession planning
- Financial audits
- Other matters that are covered under state or federal statutes
Some states have laws that limit the circumstances for executive session.
Executive Session and Confidentiality
Issues that the board discusses in executive session are highly confidential. Board members who disclose information about executive session discussions violate confidentiality and may be asked to resign from the board. Sometimes it’s difficult to prove that a board director violated confidentiality. It’s important for boards to have clear rules for removing directors from the board because confronting breaches of confidentiality is uncomfortable for everyone.
While discussions and voting are confidential in executive session, boards should be as transparent as possible under the circumstances. To prevent or reduce issues of mistrust, boards may elect to have a spokesperson give an approved, scripted speech covering a broad overview of the topics discussed while in executive session.
The general public may access a nonprofit’s IRS Form 990, which will give them some basic information, such as executive salaries and the names of large donors and board directors. The best rule of thumb for board directors is not to share anything unless it’s accessible by all.
Transparency, to the largest extent possible, generates an overall sense of trust and goodwill. Keeping matters confidential is part of the duty of loyalty and is in the best interests of the organization.
A Few Words About Social Media and Confidentiality
In today’s world, information can go viral with one or two clicks of a finger. Board directors must be ultra-careful about the type of information they choose to share on social media outlets.
Social media can be a good tool for creating transparency. When used to enhance communication and accountability, social media platforms can lead to an increased sense of trust.
At the same time, board directors need to think carefully before they send off tweets and other messages, never sending them in haste. It’s easy to send messages without thinking and accidentally cause a breach of confidentiality. A fast hand on social media can quickly set the wheels in motion for the rest of the board to have to manage damage control.
Board Directors Have a Duty to Act as a Deliberative Body
In addition to their fiduciary duties, boards have a duty to act as a deliberative body. Acting as a deliberative body means acting as one. Board directors aren’t allowed to make decisions on their own or to speak on behalf of the organization without consulting with the full board of directors first.
Transparency and Privacy Are Equally Important
People who have a hard time maintaining confidentiality don’t make good candidates for board directorships. Under the right circumstances, informal meetings and board chatter outside of board meetings could be misconstrued as an official meeting. The executive session is a viable tool to help boards keep sensitive discussions private while maintaining proper board protocol. Executive session should be used sparingly and should allow for as much transparency as is practicable.