Outside Director Lessons #11: Committees Need Rules

Outside Director Lessons Nicholas Benes

At Livedoor, I soon proposed that we set up committees of the board to oversee the granular matters in areas such as M&A, finance, and so forth, thinking that this would allow us to specialize to some extent, so that not all of us would have to oversee minor details.  But since there was little trust between the new outside directors, everyone immediately wanted to be a member of all committees, and it was impossible to deny anyone that opportunity. The end result was simply to make it unnecessary to reflect some important discussions in the formal board minutes, because the “committee” meetings were not actual “board” meetings.

I had not intended that, – something which reflects my own inexperience at the time, way back in 2007.  I realized then that unless you agree in advance on a “Charter” (defined role and duties) for the board, and on rules for record-keeping and other procedures, there may be little record-keeping at all.  Or, even if records are kept, it will be on a selective basis, the topics and items chosen by whomever is keeping the records. It was too late to ask for this.  As we say in English, “the cat was out of the bag”.  In this way, I learned the downside risk of forming “optional” committees that are not required to to make minutes that everyone agrees upon.

Here is another example of what can happen when there are no minutes.  Once, months later when we set up a “special committee” to handle a particularly sensitive internal matter, I was suddenly asked by one of the other directors, “why can’t Company Y buy company (subsidiary) XYZ?” Not only was that not the subject of the meeting, but the very question implied a violation of our policy to sell all assets having significant value by way of competitive auctions.  I responded, “Company Y can buy XYZ any time it wants, as long as they are the highest bidder in a competitive auction.”  That response completely silenced the other director.

In retrospect, I learned that if there had been a rule that at all committees had to produce and agree upon minutes or a record, I probably would never have been asked that question.

Nicholas Benes
(writing in his personal capacity and not representing any organization).

Note: I can write about what happened on Livedoor’s board only because the company no longer exists. Normally as a director, one owes a “duty of confidentiality” to the company, and this duty continues until one dies. But since Alps no longer exists, there is no longer any corporation to which I owe a duty.


If you thought this post was helpful, here are many other posts in this series, which will continue! Please come back for more. 

Outside Director Lessons #11: Committees Need Rules(click)

Outside Director Lessons #10: Directors Set Direction(click)

Outside Director Lessons #9: Appointing the CEO(click)

Outside Director Lessons #8: The Role of the Board(click)

Outside Director Lessons #7: If No D&O…Get It Yourself(click)

Outside Director Lessons #6: Insist on Total Independence!(click)

Outside Director Lessons #5: Being a Whistleblower Hotline(click)

Outside Director Lessons #4: What is Worse Than the Company Going Under?(click)

Outside Director Lessons #3: How Suddenly Companies Can Collapse! (click)

Outside Director Lessons #2: My First Experience as an Outside Director (click)

Also, kindly please read the post below, consider making a donation(click) to BDTI so we can keep contributing to good governance, Japan’s future, and sustainability… and share these posts widely!

Outside Director Lessons #1: Genesis of Director Training Nonprofit BDTI(below)

On 4/16/2023 I became 67 years old. On this “occasion” I would like to ask you to consider donating to The Board Director Training Institute of Japan (BDTI), which I have led in offering director training in Japan for almost 14 years now, training about 3,000 persons in our programs, and many more via e-Learning.  At the same time, going forward, I also will attempt to make a series of posts (on this discussion forum) giving a perspective or story related to corporate governance, based on recent events and/or my own 15 years of experience sitting on boards here (or the experiences of people I know), that will be light, easy reading but hopefully also be thought-provoking.

BDTI’s work is “missionary work” that requires passion and commitment. Perhaps these stories will be of interest in terms of revealing why I do what I do, the challenges that face Japan and its companies and investors, and how they can be overcome.

Because Japan does not have a customary or mandatory requirement for serious director training, BDTI’s courses need to be “subsidized” in some way so that we can offer high-quality programs at a price point that is low enough to attract our (overly frugal) customers, –that is to say, at prices that on a per-person-per-hour basis are one-third of less than in other developed markets.  (Even paying low salaries and donating a lot myself, this is the market reality). Moreover, “G” is the foundation on which the “house of ESG” is built, but that fact is not as widely recognized as it should be.

We “subsidize” and lower our prices in three ways: 1) first, by skimping on all expenses at a small office in the suburbs of Tokyo; 2) second, by receiving donations from individuals and  institutional investors who think it is important to improve the effectiveness and trustworthiness of corporate governance in Japan; and 3) third, by collecting and normalizing a long-term “big data” structured  database of information (including text), and selling access to it to large fund managers, including large quantitative funds.

At long last, Japanese institutional investors are now considering to support us, but this will take a bit more time…so we need your help, even if it is just a few thousand Yen.

BDTI’s Update and Plans for FY2023:  https://blog.bdti.or.jp/en/2023/03/27/fy2023/  – This contains the most recent information, concisely.
BDTI’s Training Programs:  Best to look at:  https://bdti.or.jp/director-training/ using Google Translate.

To Donate: 

Please share this post widely !!!

Thank you,
Nicholas Benes
Representative Director, The Board Director Training Institute of Japan

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