Most people often distrust things they cannot see or hear. In fact, both the 2008 financial crisis and the headlines carrying bad news have made people more suspicious. Generally, nonprofit organizations were created to serve people, so the public expects a degree of transparency and accountability regarding many issues.

Achieving a balance between transparency, privacy, and confidentiality can be challenging for nonprofit organizations. Board members often face an internal conflict between serving the public interest and their loyalty to the organizations they work for, which requires them to manage board business confidentially. For its part, the executive session is one option for handling sensitive issues responsibly, seeking a reasonable balance between maintaining confidentiality and fulfilling individual obligations to the public.

Should informal meetings be transparent?

Over time, relationships among board members evolve, leading them to discuss some issues during a chat or conversation. For this reason, board members must be aware that informal meetings should not be held. It is worth noting that the board's activities are not always limited to the meeting room; nonprofit board members must be aware that informal meetings may sometimes constitute board meetings under the law.

Should someone claim that a member held an official meeting disguised as an informal meeting, the board directors must be well aware that courts may intervene. To ensure that the board meeting was conducted officially, judges will examine the behavior of board members, the content of the discussion, and the future actions discussed by the board members.

Proper use of the executive session

When board members need to discuss private issues, internal regulations grant them the authority to hold an executive session under certain conditions. At the beginning of the session, the board requests any non-board member to leave immediately. Depending on the nature of the topics to be discussed in the executive session, specialists such as legal advisors are sometimes allowed to remain for the session.

The executive session raises some doubts about the legitimacy of board discussions. The reason for holding some meetings privately may stem from the public's limited understanding of the board's legal obligations. To maintain public trust, boards must minimize holding executive sessions as much as possible.

How do boards hold an executive session?

To hold an executive session, two board members must make a request to this effect. Subsequently, the chair announces that they will participate in the executive session and requests all board members to remain in the meeting place.

Some issues that warrant holding an executive session:

Here is a set of issues that warrant holding an executive session:

  • Sensitive and private matters related to a board or management member.
  • Legal matters.
  • Acquisition of assets.
  • Major business transactions.
  • Crisis management.
  • Evaluation of the CEO's performance.
  • Planning for change.
  • Financial audits.
  • Matters covered under formal laws.

The executive session and the principle of privacy

The issues discussed by the board in the executive session are highly confidential; thus, if any details related to these issues are leaked by a member, they are asked to resign. Although discussions and the voting process are confidential in the executive session, they must also be transparent. To mitigate trust issues, the board's spokesperson provides a letter that includes an overview of the topics discussed during the executive session.

In fact, the public can access the nonprofit IRS 990 form, which provides them with some basic information, such as board members' salaries and the names of major donors and board directors. Although transparency fosters a sense of trust, maintaining confidentiality serves the organization’s best interests.

Social media and the principle of privacy

Nowadays, information can spread easily. Therefore, board members must be cautious about the information they share on social media. In fact, these platforms can be a good tool for applying the principle of transparency when used to enhance communication and accountability. While board members should think carefully before posting or sharing any content, doing so could inadvertently violate confidentiality.

Board directors must act as a trading body

In addition to their fiduciary duties, boards must act as a trading body, where board directors are not permitted to make decisions on their own or speak on behalf of the organization without consulting the board.

Transparency and privacy are equally important

People who struggle to maintain confidentiality are not suitable candidates for boards, as their discussions outside meetings can be misunderstood as official meetings. The executive session is a tool that helps board members keep discussions confidential without breaching board protocol. Therefore, executive sessions should only be held rarely and must be sufficiently transparent.

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Location: Board Effect

Author: Nick Price