What is an executive session?

What is an executive session? It’s a critical opportunity to foster open communication and address key issues in an organisation… when done properly. Consider it a core part of your corporate governance training. 

This short guide will explain the purpose, importance, and mechanics of executive sessions in board meetings.

An executive session is a meeting conducted without the presence of “outsiders.” In corporate governance, it’s usually a meeting that only board members can attend. Shareholders, executives, and other outside parties who might participate in ordinary board meetings are generally excluded from executive sessions. 

Executive sessions can be standalone meetings or smaller parts of a normal board meeting. Minutes may be taken, although they are not necessary. Everything discussed is considered confidential.

Typical executive topics need this kind of privacy because of their sensitive nature, and the only way to work through them properly is with the comfort of a closed, private meeting. 

• Hirings, firings and other personnel-related decisions. 
• Legal issues. 
• Crisis management due to urgent financial or reputational concerns. 
• Questions over the company’s future (for example, due to a possible merger or hostile takeover).

They may seem secretive, but board members often value the privacy of an executive session for the protection it offers. 

In executive sessions, they can communicate openly and honestly (a core part of their fiduciary duty) without external pressures or the presence of individuals who might have a conflict of interest. These sessions facilitate in-depth discussions on critical issues affecting the company’s strategic direction, governance, and integrity.

Generally, it’s just board members. However, specific sessions may include select management members, such as the CEO or CFO, if the issue needs their input. Boards might also ask legal counsel for advice, but their involvement is strictly controlled based on the agenda.

They mostly function like a regular board meeting. The board chair leads the session according to the agenda, and discussion follows. The critical difference is that the chair stresses—often more than once—that the discussions are strictly confidential and should not leave the table.

Beyond that, company bylaws are usually the official source of any further rules about executive sessions. 

Be warned: your company’s bylaws may not allow executive sessions or simply fail to mention them at all. In either case, if you feel you need one, you will have to figure out how that will work in a transparent and open way.

Directors should remember that their primary focus is scrutinising the agenda items – just like a regular board meeting – but with the added layer of sensitivity or confidentiality. 

Given the secretive nature of executive sessions, it is more likely that any decision reached will negatively impact someone within the organisation. For that reason, you must remember your goal of being impartial and acting in the company’s and its stakeholders’ best interest.

Executive sessions are separate, private meetings—generally restricted to board members alone—dedicated to addressing a key governance issue that requires confidentiality. They are fundamental to effective board meetings, providing a safe environment to discuss sensitive matters crucial for informed decision-making.