In Camera Sessions: A Crucial Element of Board Governance

What are In-Camera Sessions?

In-camera sessions, also known as in-camera meetings or camera sessions, are confidential meetings held by a board of directors without the presence of management or other non-board members. They provide an opportunity for board members to discuss sensitive matters openly and candidly, ensuring confidentiality and allowing for better governance practices and decision-making.

Scheduled or impromptu, in-camera meetings are considered legitimate board meetings in the eyes of the law, so long as the usual board meeting requirements are met, such as those relating to the quorum and notice of meeting. Generally, boards will hold in-camera meetings to discuss confidential matters, maintain board independence and oversight, and build stronger relationships among board members.

Note: I was advising a publicly traded energy company in Calgary. The Board Chair, who was an independent, outside director, would “walk the halls” once a month and have impromptu, 1:1 meetings with senior leaders of the organization. The CEO endorsed these meetings as this organization thrives on transparency and is providing direct access to officers and other employees of the organization. While these meetings are in-camera, they do not meet the requirements for a board meeting.

Origin of In-Camera Sessions

Historical Context

The term "in-camera" comes from Latin, meaning "in chambers." It has been used in legal contexts to refer to private discussions held by judges in their chambers, away from the public and jury.

Adoption in Corporate Governance

In-camera meetings became more prevalent in corporate governance practices in the early 2000s, particularly after the enactment of the Sarbanes-Oxley Act in 2002. This legislation, which aimed to improve corporate accountability, encouraged more robust and independent oversight by boards of directors.

Who Attends In-Camera Meetings? Board Members and Others

Standard Attendees

Typically, in-camera sessions are attended by:

1. Independent board members
2. Non-executive directors

Occasional Attendees

Depending on the nature of the discussion, the following individuals might be invited for portions of the session:

1. CEO (for certain topics)
2. Executive director
3. External auditors
4. Internal audit executive
5. Legal counsel
6. Other executives (when their input is required on specific issues)

Topics Typically Discussed During In-Camera Sessions to Discuss Confidential Matters

In-camera sessions provide a forum to discuss confidential matters that require confidentiality or independence from management. Common topics include:

Managing potentially prickly issues, such as addressing sensitive and contentious matters that arise during board meetings, is also a key reason for holding in-camera sessions. Ensuring that other members are invited to participate in these discussions is crucial for obtaining diverse perspectives and effective dialogue.

1. CEO Performance and Compensation

Board members can freely discuss the CEO's performance, set performance goals, and determine appropriate compensation without the CEO's presence.

2. Board Performance and Dynamics

Board chairs can assess the board’s effectiveness, manage discussions, ensure inclusivity among board members, and address concerns about board composition or individual director performance.

3. Succession Planning

Discussions about potential successors for key executive positions, including the CEO, are often held in-camera to maintain confidentiality.

4. Sensitive Business Issues

This might include potential mergers or acquisitions, significant litigation, or other confidential strategic matters.

5. Conflicts of Interest

In-camera sessions provide a forum to discuss and address any potential conflicts of interest among board members, management, or other related parties.

6. Audit Matters

Meetings with external auditors without management present can encourage more open discussions about financial reporting and internal control issues.

7. Ethics, Compliance and Whistleblower Reports

Serious ethical concerns or whistleblower reports may be discussed in-camera to ensure confidentiality and impartial consideration.

Benefits of In-Camera Sessions

1. Promotes open and honest communication among board members
2. Enhances board independence from management
3. Provides a safe space for discussing sensitive issues
4. Strengthens the board’s oversight function by ensuring that boards conduct meetings in-camera to manage sensitive and contentious issues privately
5. Encourages more robust decision-making processes

In-camera sessions are legally recognized as legitimate board meetings, provided that other formal requirements, such as quorum and notice, are fulfilled.

Best Practices for In-Camera Meetings

1. Hold regular in-camera meetings as part of full board meetings
2. Establish clear guidelines for what should be discussed in these sessions
3. Keep brief minutes of in-camera meetings, focusing on decisions made rather than details of discussions
4. Provide a mechanism for communicating relevant outcomes to management when appropriate
5. Ensure all board members understand the confidential nature of these sessions

In-camera meetings are a vital tool for effective board governance, allowing directors to fulfill their oversight responsibilities more effectively and independently. Incorporating such discussions as a regular agenda item can promote transparency, alleviate concerns about secrecy, and mitigate mistrust among senior management and staff. When used appropriately, these sessions can significantly enhance a board’s ability to serve the best interests of the organization and its stakeholders.