Virtual Board Meetings in Times of Crisis

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Overview


Third in a series of updates on how the pandemic is implicating basic elements of governance.

We’re quickly become a “Zoom Meeting Nation” when it comes to corporate board meetings. At a time when it is practically impossible to gather directors for in-person meetings, video and other forms of telecommunications offer efficient alternatives when timing is critical. This is especially the case when both legal principles, and the necessities of crisis management, call for increased director engagement. Virtual meetings by Zoom or other similar means provide a rapid and easily accessible platform for board and committee convocation.

But, as with other ministerial board procedural matters, there’s a catch. Most state business and not-for-profit corporation laws authorize meetings of directors to be held anywhere (i.e., no distinction between out of state and in-state) and also by any means of communication. There is a clear public policy in favor of applying modern electronic technology to allow a board of directors to participate in a meeting conducted by electronic means even though no two directors are physically present, and no specific place for the meeting has been designated.

But state law is not uniform on what constitutes an acceptable means of ‘electronic technology.’ For example, some states refer to “any means of communication”; other states refer to “conference telephone or other communications”; some others use the broader reference of “telephone or other interactive technology including but not limited to electronic transmission, Internet usage, or remote communication.” Most, however, share a common requirement that the platform allow all persons participating in the meeting to be able to communicate simultaneously with each other (critical from a public policy perspective).

So it is very important to check the applicable section of state law to make sure that the intended electronic platform falls within the statute’s scope. This extends also to matters of meeting notice and quorum; it is important to review how the statute treats those elements. It is also important to consider potential distinctions between meetings of the board of directors, which likely happen frequently and for many purposes, and meetings of members and shareholders, which likely happen annually and cover broad themes rather than day-to-day business. Privacy and privilege questions should also be considered.

Zoom and similar forms of electronic technology provide welcome opportunities to accommodate close board engagement during a crisis in which in-person meetings over the near term are impractical. Given the application of state law, there’s value in having the general counsel review the sustainability of the company’s desired approach.

Click here to access the first article in this series, Corporate Authority for Extraordinary Delivery of Care Decisions.

Click here to access the second article in the series, The Executive Committee in Times of Crisis.