Strategies for Achieving the

Well-Structured Board Meeting

July 17, 2014

Luise M. Welby

Managing Associate General

Counsel,

Freddie Mac

Arden T. Phillips

Governance Officer and

Corporate Secretary,

WGL Holdings, Inc.

J. Steven Patterson

Partner,

Hunton & Williams LLP

David B. Meltzer

General Counsel and

Chief International Officer,

American Red Cross

• Setting Context and Role of Directors in Meetings

• Meeting Agendas

• Preparing Materials and Preparing for Meetings

• Conduct of Meetings

• Role of Lead Independent Directors

• Independent Director Sessions

• Advisors in Board Meetings

• Note-Taking in Board Meetings

• Preparing Board Minutes and Resolutions

• Committee Meetings

• Post-Meeting Checklist

• Top 10 Tips for Successful Board Meetings

2

Topics for Today

• Current environment and impact on boards – Geopolitical tensions

– Heightened responsibility for risk management

– SEC rulemaking activities

– Increased regulation in a number of industries

– Increased activism of shareholders, advocacy groups and plaintiffs’ bar

• Strategic oversight vs. day-to-day management

• Discharge of fiduciary duties – Duty of care

– Duty of loyalty

– Business judgment rule

Setting the Context – Role of Board

3

Role of Directors in Meetings

• Discussions and decisions – viewed in relation to stakeholders

– For-profits: Improve long-term shareholder value

– Non-profits:

• Further organization’s specific purpose

• Safeguard tax-exempt status

• Substantive component: Engagement of directors (importance of pre-meeting preparation)

• Process component: Ensure actions are well supported with information, advice and deliberation

4

Ask with every decision: How will this decision affect long-term shareholder value?

or How will this decision impact our mission?

Role of Directors in Meetings

• Inherent tension between directors and management

– Management – seeking to minimize second-guessing by

directors (more control → less criticism)

• Management’s balancing act: Provide sufficient

information without promoting second-guessing by

directors (beware the sterilized PowerPoint presentation)

– Directors – seeking to fulfill fiduciary duties

• Directors’ balancing act: Engage in dialogue without

stepping into management’s role (challenge management

without becoming threatening)

5

Meeting Agenda

• Focused meetings maximize use of directors’ time and skills

– Board meetings are infrequent

– Management access is limited

• Who prepares agenda:

– Traditionally chair/CEO

– Role of non-executive chair or lead independent director

– Role of other directors

– Role of management

• Contents of agenda:

– Strategic matters – e.g., strategic planning, potential acquisitions

– Recurring matters – e.g., operational performance, committee reports

– Housekeeping matters – e.g., approval of minutes

6

Common Agenda Items

• Approval of prior meeting minutes

• CEO report – company performance vs. strategic plan and company’s peers

• CFO report – financial reporting; financial activities

• General counsel report – material litigation

• Independent director sessions

• Committee reports

• Officer nominations and elections

• Non-routine topics – e.g., strategic review, industry review, product development, on-site visits

7

Sample Agenda

• Call to order

• Approval of minutes

• Audit committee report

• Compensation committee report

• Nominating and corporate governance committee report

• CEO report

• CFO report

• Independent director session

• Director update on recent cases affecting boards

• Adjournment

8

ABC Company – Board of Directors Meeting September 1, 2014

Preparation of Meeting Materials

• Primary source of information – senior management

• Directors should receive information that is:

– Timely and relevant

– Concise and accurate

– Well organized – e.g., in notebook or e-room

– Supported by necessary background data

– Designed to inform of material aspects of operations, performance, prospects

• Remember the duty of care: Must be informed of all material information reasonably available

• Directors need time for careful study and thoughtful reflection

9

Board Meeting Prep Checklist

• Review bylaws regarding requirements for board meeting – e.g., notice, quorum requirements

• Send notice of meeting – Including date, time and location of meeting

– Usually included with agenda and meeting materials

• Confirm attendance to ensure quorum

• Prepare agenda – in collaboration with CEO and lead director

• Prepare resolutions – for any actions to be taken

• Prepare background materials – for each agenda item

• Prepare summaries – for each agenda item

• Ensure availability of necessary management and advisors

• Send meeting materials well in advance – e.g., one week

10

Conduct of Meeting

• Maintaining control

• Management representatives in meeting

– CEO

– General Counsel

– CFO

– Others

• Special issues:

– Frequency of meetings

– In-person vs. videoconference or telephonic meetings

– Director absences

– Disagreements

– Length of independent director sessions

11

Role of Lead Independent Director

• CEO/chair model vs. independent chair model

– Combined CEO and chair – lead independent director plays significant leadership role

– Separated CEO and chair – clear separation of power and division of responsibilities can avoid issues regarding authority and decision making processes (consider both internal and external perceptions)

• Role in facilitating effective board meetings

• Presides over independent director sessions

• Role in ensuring that board fulfills role as evaluator of CEO and CEO succession plan

12

Independent Director Sessions

• Open-ended agenda – opportunity for independent directors to engage in candid discussions regarding: – Executive compensation

– Management performance

– CEO succession planning

– Quality of information being provided to directors

– Adequacy of board meetings and agendas

– Sensitive issues related to specific members of management

• Timing of independent director sessions

• Frequency of independent director sessions

• Occasional exclusion of lead independent director

• Minutes – broadly reflect topics discussed

13

Advisors in Board Meetings

• Legal advisors – General counsel – primary resource for legal

analysis and governance advice

– Outside counsel – utilized for expertise on specific matters (e.g., transactions)

– Independent board counsel – engaged for special circumstances

• Non-legal advisors – Industry analysts/consultants – provide objective view

– Other potential advisors: investment bankers, accountants, compensation consultants

14

Note-Taking in Board Meetings

• Variety of practices – generally not recommended but difficult to control

• Legal issues

– Producible in litigation

– Easily misinterpreted and taken out of context

– Inherently inaccurate

• Electronic archiving

• If notes are taken, encourage collection and destruction at conclusion of meeting

15

Preparing Minutes – Purpose

• Documenting corporate action – Minutes document all formal actions taken by board

– Function as official corporate records

• Evidentiary effect in litigation – Well-prepared minutes can help evidence board’s compliance

with fiduciary duties

• Contemporaneously prepared minutes can provide helpful

evidence regarding board’s decision-making process

– Minutes can jog directors’ memories of what they considered

and what actions were taken, particularly in depositions or

witness testimony occurring years after board meeting

16

Checklist for Preparing Minutes

• Date, time and place of meeting

• Nature of meeting (special or regular)

• Names of directors, officers and advisors present – existence of quorum

• Name of officer taking minutes – secretary of meeting

• Approval of prior meeting minutes

• Description of matters discussed – include enough detail to demonstrate discharge of fiduciary duties; omit personal observations of individual directors

• Actions taken at meeting – resolutions for actions taken

• Attach copy of notice and materials provided to directors

• Adjournment and date, time and place of next meeting

17

Guidelines for Preparing Resolutions

• Establish deliberation and supporting information –

reflect discharge of fiduciary duties

• Clearly describe actions taken – check relevant statutes

for legal requirements

• Specifically identify persons to whom authority is

delegated

– All officers vs. specific officers

– Include broad grant of authority for dealing with follow-up items

for which board action should not be necessary

– Authorize amendments

• Ratify actions previously taken

18

Committee Meetings

• Typical committees:

– Audit committee – risk management; internal auditor

– Compensation committee – executive compensation;

benefit plans

– Nominating and corporate governance committee –

management succession plans; board evaluations

– Others (e.g., special transaction or litigation

committees)

• Agenda for committee meetings

• Advisors in committee meetings

19

Post-Meeting Checklist

• Retain copy of materials provided and information presented to board

• Prepare minutes

– Include any resolutions reflecting actions taken

– Circulate to directors for review

– Include in following meeting’s materials for approval

• Collect/destroy notes taken by directors at meeting

• Destroy notes taken by meeting secretary

• Follow up with directors regarding questions or requests made at meeting

20

Top 10 Tips for a Successful Board Meeting

21

1. Prepare pre-meeting checklist

2. Get input from lead independent director on agenda

3. Prepare well-organized notebooks with summaries

4. Prepare comprehensive resolutions for actions taken

5. Send materials to directors at least 1 week in advance

6. Include non-routine topics on agenda

7. Ensure independent director sessions convened with adequate time

8. Prepare outside advisors and consultants

9. Collect and destroy notes taken

10.Prepare minutes promptly

Presenters

J. Steven Patterson is a corporate partner in the Washington office of Hunton & Williams LLP. He is co-head of the firm’s

Corporate Finance and M&A Practice Group and has represented boards of directors of public companies in a wide variety of

matters, including M&A transactions, shareholder activism and strategic defenses, senior management separations, and

corporate restructurings.

David B. Meltzer is General Counsel and Chief International Officer of the American Red Cross. Having first joined the

American Red Cross in 2005 to lead its international activities – which includes the $486 million response and recovery efforts

following the Haiti earthquake – Mr. Meltzer assumed additional responsibilities in January 2013 as the General Counsel of the

American Red Cross. Prior to joining the American Red Cross, Mr. Meltzer held a number of legal and non-legal positions in the

world’s largest satellite communications organization – Intelsat – and prior to that had legal positions at two law firms and the

World Bank. Mr. Meltzer earned his B.A. in International Relations from the University of Pennsylvania and received his J.D.

from the George Washington University.

Arden T. Phillips is Governance Officer and Corporate Secretary of WGL Holdings, Inc., a $2.5 billion mid-cap, NYSE-listed

public utility holding company. Through its subsidiaries, including Washington Gas, the company engages in the sale and

delivery of natural gas and provides energy-related products and services. Mr. Phillips has several years of general legal

experience with an emphasis on corporate governance, securities, risk management, acquisitions and general commercial and

financing transactions. In addition to other duties, as Governance Officer and Corporate Secretary, Mr. Phillips has

responsibility for preparing filings with the SEC, coordinating meetings of the board, drafting and distributing the company's

proxy statement and implementing various governance policies and practices.

Luise M. Welby serves as Managing Associate General Counsel in the Mission, Legislative and Regulatory Affairs Department

of Freddie Mac’s Legal Division. In this role, Ms. Welby has responsibility for legal, regulatory and corporate governance

matters involving risk management and new initiatives, including providing legal support to Freddie Mac’s Board

of Directors and relevant committees on such matters. Before joining Freddie Mac in 1997, she spent

seven years at the SEC. She began her legal career as an associate at Hogan & Hartson (now Hogan

Lovells) with a broad range of experience in the commercial and tax departments.

22