Q&A #64 – Is it appropriate to take an official action in executive session?

Question: I am the Executive Director of a nonprofit organization, and the Board of Directors recently approved my annual compensation package after the Board meeting during executive session, without myself or any other staff present. Is it appropriate to take an action like this in executive session, or should that be done during the official meeting?

Answer: Whether it is appropriate to take an official action during executive session depends on what your organization and Board understands executive session to mean. “Executive session” generally refers to a private meeting of the Board (and perhaps select other invitees), which is intended to provide a space where Board members can hold candid discussions on sensitive or confidential matters. Executive session is a useful and appropriate format for some issues, but it is important to be clear about whether executive session is intended to be “off the record,” as official Board actions must ultimately be documented in the meeting minutes.

There is no standard set of rules for executive sessions, and practices can vary widely and change depending on the specific circumstances. Executive sessions are often, but not always, conducted without minutes being recorded as a matter of practice.

In your case, it is not clear whether the Board is using executive session to discuss and decide your compensation outside of your presence (which is totally appropriate and a best practice) or whether Board decisions are being made during executive session that are not being properly documented.

In particular, there are specific best practices regarding the documentation of compensation decisions as discussed in Q&A #54 and addressed in Part VI, Line 15 of the Form 990. It is highly recommended that compensation decisions be documented in meeting minutes that show the compensation terms, the date the arrangement was approved, the Board members who were present during review and approval, the comparability data that the Board members relied upon in reaching their decision, and other key facts.

Nonprofit Boards (or properly formed committees thereof) can and should discuss sensitive matters like this in private, as it is important for Boards to maintain independence in their deliberative process without being unduly influenced by the Executive Director or other staff members. However, executive session should not serve as an invitation to leave critical information out of the official meeting minutes.

Planning Tip – Consider adopting governance policies or Bylaws provisions that establish guidelines for calling an executive session, the issues that are appropriate for executive session, the confidentiality of deliberations, and inclusion and exclusion of attendees. Carefully thinking through these matters in advance and crafting the appropriate process language will help to avoid misunderstanding, overuse, and misuse of executive sessions.

Executive session is an important tool to facilitate candid and confidential discussion among Board members. But official Board actions should always be considered “on the record” and reflected in the meeting minutes.

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