Understanding Executive Session Protocols: The Essential Guide
Executive Sessions – What They Are
Executive sessions, also referred to as "closed sessions" or "executive committee meetings," are functions of decision-making bodies, such as a board of directors, that take place without the presence of staff, general employees, and other outsiders. They serve as an important function in societies worldwide that offer a powerful and viable means of carrying out necessary business while ensuring that the organization’s interests and policies are maintained in a confidential and secure manner.
Although they are conducted in the absence of non-members, there are restrictions regarding the circumstances under which each type of executive session meeting is held. For example, deliberations dealing with litigation matters can be closed to the public if public knowledge would have a detrimental effect on the organization.
Executive sessions can be held in several different environments, including those where business is conducted. In a corporate setting, regular meetings of the executive board can be held with only board members. These may include instances where a company is undergoing an asset sale or is in litigation that requires closing the meeting.
As another example, executive sessions are commonly used by the boards of directors of condominium associations or neighborhood HOAs. Here, there is no possibility of passing any motions in closed executive session meetings, but it is specifically designed to discuss topics such as grievances, lawsuits, potential violations, and other matters that should remain private.
In governmental agencies, executive sessions are used similarly to corporate settings . To participate in executive sessions, members must adhere to strict closed-meeting laws for complying with procedures that complement public meeting laws.
Executive session laws are particular to each state, and although they are often open to interpretation by the courts, they generally govern the use of these select types of meetings. Legislatures in every state have enacted Freedom of Information Acts (FOIAs) that set out the minimum requirements for transparency in government and include allowances for holding special meetings and executive sessions.
For example, as recognized by the Wisconsin Court of Appeals: The Open Meetings Law contemplates that the public should be able to observe the deliberations and proceedings of government bodies. The public right to observe is balanced against the government’s need for confidentiality on certain matters … Executive sessions provide governmental bodies with a limited mechanism for the pursuit of confidential purposes within a general policy favoring openness (Somers v. Sixberry, 2006 WI App 177, P3).
In cases that involve interpretations of FOIA and judicial proceedings, courts have applied a strict scrutiny standard of review and have found that the burden of proof is on the public body that is setting forth a claim for an exception that permits a closed executive session. Where it has not been raised as a defense, courts have held that the failure to follow statutory notice requirements for executive sessions overrides procedural or substantive issues that arise as exceptions to the open meetings law.
Rigidly enforced compliance with state laws for executive sessions holds boards and their committees accountable for ethical and responsible actions.
Essential Rules
Hid chances are that your HOA governing documents say very little about executive sessions. That’s ok, as most courts will fill those voids, but let’s first take a look at some key rules and regulations that’ll help make sure you’re doing things right in your executive sessions.
First off, keep in mind that you may not discuss anything in an executive session unless it qualifies under the law. Some topics, like discussing a proposed contract, are fairly clear cut. But other topics, such as member discipline, will generally be less clear. Still, if you’re looking to discuss any other topic, it is worth asking whether the discussion meets the standards for executive session.
In addition, in most states, members have a right to know when an executive session is being held. This notification can include both the date of the session and the general topic to be discussed. To find out the requirements in your state, consult your state’s HOA statutes.
After holding an executive session, many states require HOAs to provide members with written minutes of the meeting, in a similar fashion to regular meeting minutes. But while regular meeting minutes generally must be made available to members within a specific period of time, statutory guidelines for providing executive session minutes typically extend longer. Again, check your state’s HOA statutes for the exact requirements in your state.
Attendance Requirements
While the members of a property owners’ association as a general rule may attend all board meetings, attendance at executive sessions is not open to all members. However, as discussed below, legislation currently effective and likely changes to the law will support broad disclosure of executive session attendance in the very near future. Under the existing statutory standard, only members of the board of directors and the executive personnel of the association may attend executive sessions (see O.C.G.A. § 43-3B-5(a)). Board members are expected to maintain the confidentiality of executive sessions held to discuss: (1) employment activities of individuals or the association, including compensation, performance and discipline, or the filling of board vacancies; (2) consultation with legal counsel; (3) pending or threatened litigation; or (4) the sale or purchase of real property, debt service, investments or securities; provided that the foregoing only apply if no final action would vote or general statement or summarization of the final vote taken is taken or is required to be taken. (See O.C.G.A. § 43-3B-5(b)).
Exceptions to these restrictions on executive session attendance include, but are not limited to: (1) attendance of associations’ legal counsel, professional advisers and other guests invited by the board; (2) attendance by any person(s) authorized to attend executive sessions as described in association governing documents or bylaws (which, however, may not be more expansive than persons associated with the board); and (3) the right of any member of an association to request to address the board during executive session. (See O.C.G.A. § 43-3B-5(c)).
The most significant legislation in the last five years from the Georgia Legislature that impacts a member’s right to attend an executive session is the passage of the Open Government Act in 2012, which broadened the definition of "public officer" to now include members of the board of directors of certain nonprofit corporations with over 25 members or with gross receipts in excess of $100,000 annually. Although the scope of application may be questionable, to the extent applicable, the Open Government Act provides for the public disclosure of the time and place of an executive session, along with the subject matter to be discussed therein. (See O.C.G.A. § 50-14-1(g)-(h)). The 2012 legislation further requires governmental entities, including certain nonprofit corporations, to comply with the Open Records Act, which provides for the production of certain records upon a show of substantial need. (See O.C.G.A. § 50-18-72(a)(4)). Although not specific to property owners’ associations, these provisions may be applied to such associations. As such, boards may be compelled to produce minutes or reports prepared in the course of their executive sessions as public records.
It is reasonable to expect the general assembly to clarify these statutory provisions in light of their conflicting language and intent. Likewise, the Open Government Act will likely be amended in the near future to close the gaps between its application to property owners’ associations and other nonprofit corporations.
Confidential Nature of Executive Sessions
When directors hold an executive session, they need to keep it private – the conversation should not be disclosed to anyone. When an executive session is called, the board officers and other invited individuals may attend. If the executive session is for independent directors only, then the officers and invited executives must leave. Board officers who are not asked to leave an executive session should leave the room or log out of a video conference. Directors should never invite outside guests to observe, even if they are not speaking.
Confidentiality includes information learned in preparation for an executive session. Typically, when a committee chair or the person calling the executive session has an agenda in mind, directors should stop their own research or work until the executive session is over. If a director is acting out of the scope of their authority in discussing the matter with outsiders, that discussion should not continue. Any information that is supplied to a director from staff or another outside party should be collected and saved until after the contract is signed. Examples of such information are a compensation consultant’s analysis of compensation of similar positions in other companies, reviews done by an executive coach or PEO about the current employment contract, comparable grievant documents from other companies, or reviews of impacts of changing the contract provisions on other employees.
The consequences of violating the confidentiality of the executive session include potential litigation liability, loss of credibility of the board and directors, damage to the company, loss of competitive advantage in markets, and derailing corporate initiatives.
Typical Topics Covered
Commonly discussed topics typically include personnel matters, advice of legal counsel, other legal matters, collective bargaining, litigation or consultation with the board’s legal counsel as authorized by the Open Meetings Act and meetings with employees. Personnel issues may involve performance issues, potential discipline, recommendations for termination or non-renewal of employment contracts. Collective bargaining matters may involve strategy, positions to take and/or the status of the collective bargaining negotiations. For example, union personnel may participate in executive sessions because they need to discuss their strategy for negotiations or present contractual language changes to the board and discuss the issues they face in the hope of gaining insight from the board . Legal advice topics typically include a case-presentation or discussion of an internal investigation in which the officer has a specific personal stake. Sometimes it may include purely policy issues, but policy formulation or guidance is a proper reason to go into closed session. A more narrowly construed reason for going into closed session is when the board seeks to obtain legal advice from its legal counsel as allowed by the Open Meetings Act. The key criterion here is whether the discussion seeks legal advice, i.e., the law or a legal opinion from counsel regarding legal matters that are pending or about to be filed. Discussions of strategy or policy or dealing with reviewing matters do not give rise to this exception.
Preparing for an Executive Session
If a Board of Directors intends to meet in executive session (i.e., without members of the public or other non-board members) to consider whether or not an Association will accept a settlement offer, the Board should follow the following steps and requirements:
- Notice of a board meeting must be provided to members that is accompanied with a general description of the business to be discussed, as described in paragraphs (1) through (6) above.
- The board must convene the open portion of the meeting and announce the item(s) to be considered in executive session of the executive session. The members must be given the opportunity to comment on the issues.
- The board must vote in open session to convene in executive session to consider the matters on the agenda. The vote must be recorded in the minutes of the meeting. If the California Nonprofit Mutual Benefit Corporation Law applies to Association business this requirement may or may not be required. In that event, the Association should consult legal counsel.
- The board must invite any persons they want to remain present even after the board adjourns to the executive session.
- In the event the board chooses to evaluate a member’s request to be placed on special assessment plans, the board must advise that member in writing of the right to speak in open session, consistent with Civil Code section 1367.1, and provide the member the choice of speaking at a time either during or immediately prior to the board’s executive session at which assessment matters will be considered. Procedures for implementing this provision are discussed above.
- The board should be cautious about including or sending any documentation to executives sessions and should not send any documents that contain sensitive or privileged information outside of the board (e.g., copies of a settlement offer letter).
- The board should be cautious about those who may attend executive sessions to assure that persons in attendance only receive materials prepared for the board. Materials directed only to a committee or individual board member, or materials prepared for a meeting of a committee rather than the board, should not be distributed in executive session without specific authorization from the board. Records containing confidential information should not be distributed to anyone but the board, but secret ballot tally sheets, ballots, and related materials properly maintained at a meeting of the board’s tellers may be distributed to tellers prior to the board reconvening at the tallies meeting.
Legal Aspects of Executive Sessions
The legal consequences of executive sessions are both wide-ranging and complex. If the session is properly called and noticed, it should protect an organization from a legal perspective, but even among the experts, there is great variability in the application of statutory and common law concerning board meetings. Because there are certainly potential liability issues involved with both open and closed board meetings, the best advice is for all boards to have both an open meetings policy with appropriate guidelines for doing business in open and executive session, and a board member confidentiality policy, which addresses handling concerns about privacy and possible exposure to lawsuits. In general, board members should remember that there are increasingly frequent law suits brought by disgruntled members, vendors, management, and other third parties alleging that directors are misusing their authority or that the corporate interest must come before personal interest. While legal action is not the main concern when an executive session is called, if a director is acting in bad faith or in violation of the by-laws or articles of incorporation, bad things can happen.
Conducting Executive Sessions: Best Practices
Executive sessions, a time when the board goes behind closed doors to discuss important matters without management or outside advisers, can be useful, but they are not the end-all and be-all of corporate governance. To ensure that executive sessions benefit the company, best practices in dealing with such sessions include the following:
1. Prepare for executive session by discussing with directors beforehand those key topics that could benefit from participation of someone not in management (e.g., management succession needs, self-evaluation of the board, or issues involving work with outside counsel).
2 . Prepare an agenda for the executive session and circulate materials in advance so directors can study the issues under consideration ahead of time.
3. Maintain order during the executive session by having a designated lead director or audit chair (if the issue is accounting-related) who directs the discussion, keeping it focused on the materials and agenda prepared in advance, reminding directors of the purpose of the discussion, and keeping in mind the ultimate goal of recommending a course of action in an efficient and effective manner.
4. Conclude the executive session by agreeing on next steps, which might include the preparation of a recommendation to the full board.