3.4.7 Executive sessions

The second method of securing proper distance between independent directors and the CEO is having executive sessions, a phenomenon confined to the US. Contrary to what the words say these executive sessions are meetings without any executives. The NY Stock Exchange recommends regular scheduling of such meetings, not only to foster better communication among independent directors, but also to prevent officers from becoming alarrned when such sessions are suddenly convened.1

An independent chairman of a US listed company has informed me that he first holds an executive session before every board meeting to develop altematives and promote questioning, and then again after each board meeting, to hear the views of all the NEDs. The next morning he communicates those views to the CEO. Executive sessions merely constitute a discussion forum and may not be used for actions which have to be taken by the whole board. Detailed minutes are not customary and are discouraged.2 Another independent chairman has informed me that in his company executive sessions normally take 2 minutes, but if there is a problem with the CEO they take 2 hours.

While in the Netherlands the supervisory board nearly always meets together with the managing directors, except for the annual evaluation meeting, some large Dutch companies already hold separate meetings of supervisory directors more often. In the UK, NEDs do not generally meet separately more than once or twice a year to evaluate themselves and the executives. However, some companies in the UK are now starting to adopt the US practice of having regular meetings of NEDs only.