7.5 Importance of Process and Good Records

It is very important that each committee of the board, including special committees, as well as the board of directors, keep accurate minutes and records of their activities. These records must document the process that boards followed to make major decisions of the company. Minutes (promptly drafted) should show the Board considered all the issues, worked with experts, both inside and outside the Company, listened to presentations relevant to the decision, and engaged in serious discussion. Courts are ill-equipped to determine whether the actions a Board has taken are good, substantively, for a Company; but courts are very adroit at reviewing the process a Board follows in taking such actions and are greatly influenced by it. Whether serving on a committee or the full board, every board member must focus on (1) being well informed, (2) being deliberate and (3) being inquisitive.

When dealing with a sensitive issue (such as a merger or acquisition, an investigation, etc.) it is very important that boards retain the best experts (legal, financial, operational and so forth) but that they don't abdicate their responsibility to these experts. Boards must be able to show through a record of the process that they were diligent in overseeing and directing their advisors and considering all aspects of a decision. If boards use a special committee, they must do it right. First, they must ask themselves whether or not a committee is needed. Then they must ask what the issue is to be solved. Third, they must determine whether or not special advisors are needed. Fourth, those dealing with the issue must be and remain independent. In most cases, where there is a conflict between the board and management, a committee works best. It is also very important that board members exercise care when sending emails to each other or the company because those emails can provide evidence for subsequent litigation. In fact, one litigating attorney is famous for saying that the "E" in email should stand for the "E" in exhibit, meaning courtroom exhibit.