The Executive Session

Every board meeting should end with an executive session. The term executive session is an oxymoron because it is a meeting of all the board members other than the executives of the company.

The first time most CEOs hear of this idea, they hate it. The words "we want to meet without you" strike fear in the hearts of most CEOs. And understandably so.

But it is a critically important part of the Board's job to manage the CEO and to some extent the CEO's senior management team. The Board is required to regularly discuss the performance of the CEO and the senior team, to address their compensation, and to work to make sure the CEO and senior team are working together as well as they can.

You can't do that job with the executives of the company sitting in the meeting. And yet, you want the executives of the company in the Board meeting. The more the better in my opinion, at least for most of the meeting.

So "best practices" says that you should end every Board meeting with an executive session. Some executive sessions last 5 minutes or less. There is simply very little to discuss. Some executive sessions last hours. That's generally not a good thing. Most last 20 to 30 minutes.

I've been sitting on Boards since 1990 and have probably participated in over a thousand Board meetings. To be honest most of them did not end with an executive session. In addition to the CEO's discomfort, there is also the issue of timing. Most Board meetings end in a rush. It is seldom that the CEO's agenda fits into the set time slot. And Board members have schedules to keep. So it is the executive session that often gets skipped.

So I don't totally practice what I preach. But after having participated in a particularly excellent executive session recently, I am recommitting myself to executive sessions. I will need all of your help. Entrepreneurs and CEOs should embrace them and make sure they happen. And fellow VCs should do the same. They are incredibly important and we have a fiduciary duty to do them.

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Comments (Archived):

  1. Julien

    I guess in the case of a CEO with a board seat, he favors his “CEO hat” and leaves the meeting to other board members?

    1. fredwilson

      almost all CEOs are on the board. it is very rare when they are not. and Iwould not personally be comfortable being on a board without the yes, that’s the whole point. it’s a meeting of the board without the CEOand any other execs of the company

      1. Donald E. Foss

        How do you do this with seed-level startups, where typically the only non-executive or non-founder board members are 1 VC and 1 independent advisor? Thinking about the “balanced” board…

  2. Sllecks

    As I’m understanding the role of a board more and more, it seems like the legal responsibilities (in concert with the legal liabilities) generally seem downright miserable. Why would anyone agree to be a part of one?

    1. fredwilson

      it’s the single best way to watch over your investment if you aren’t acontrol investor

  3. RichardF

    hmm…this is an interesting one Fred, are these meetings minuted and distributed to the executive team afterwards?I’ve always been aware of VC’s informal chats about their mutual investments and I’ve seen sub committees that discuss compensation without the executive team being present however, specifically if the founders with a reasonable equity stake are part of the executive team, isn’t there the potential for mistrust and conflict of interest if they are not included?

    1. fredwilson

      you can’t have a candid discussion of someone’s compensation or performancewhen they are in the roomso no these meetings are not minuted and distributed to the team afterward

      1. Jared McKiernan

        Is the team then informed of the conclusions made as a result of the meeting? This seems like a key step and a great chance to limit “surprises” to execs about performance/comp.I see no downside to accountability.

  4. William Mougayar

    What if the CEO is also chairman of the board-does he skip too?What sorts of outcomes have you seen come out of these sessions?

    1. fredwilson

      yes, he or she leaves the room no matter what position they holdthese sessions lead to better outcomes because it allows the board todevelop a consensus about performance, feedback, and compensation

    2. SG

      CEO being the chairman of the board isn’t a good corporate governance practice in itself. But even if that is the case, the board should meet without the chairman.

  5. Pascal-Emmanuel Gobry

    Quick hit: an oxymoron is an expression where the two terms contradict each other (“the silence whistles”); “executive session” isn’t an oxymoron. It may be a paradox.That was the pedantry minute this morning on AVC. Hope you all enjoyed it. 😉

  6. Aviah Laor

    “and to some extent the CEO’s senior management team” – without the CEO presence?

    1. fredwilson

      yes, but in that case the board should absolutely share that feedback withthe CEO right awayit’s useful for the board to discuss the senior team without the CEO in theroom from time to time

  7. robertavila

    The issue of CEO “discomfort” is a curious one. One of the most basic characteristics of a market economy is “discomfort.” Everyone is at the mercy of the market and threatened by competition. Anyone who feels safe and secure is living in a fools paradise. Additionally, when the competing businesses are joint stock companies, no one is his/her own boss. These are the reasons why those who prove most successful in bear such risk are highly compensated. They are not there by right but for a reason. The fact that a board is concerned that its CEO might find this situation “discomforting” suggests that the board itself does not understand what it is about.

    1. fredwilson

      yes, but just look at this threadyou can see that discomfort in the comments already

      1. TDKlein

        Completely agree on the need for executive sessions, but also feel there should be some rules of the road. Most CEO’s naturally get uncomfortable when it’s done inconsistently, recognizing something has changed and there’s a problem. If it’s a normal part of board deliberations, there is less concern. Also, the chairman (if it’s not the CEO) or a regularly-designated board member should be empowered to provide feedback right away. CEO’s deserve to be treated with respect and honesty. It’s natural and appropriate that some matters should be communicated one-on-one rather than in a group. This is a formal way to do that and most CEO’s appreciate the feedback.

        1. fredwilson

          yes, exactlyand the reason to make them routine is if they are not, then scheduling themmakes the CEO nervous, as you point out

          1. robertavila

            This is critical. The law of “the normal” of tradition and habit has far more power then the official rules. And these norms are set very early in any institutions history. This is why serious thought about “What kind of a company do we want to build?” has to be done at the very beginning, otherwise personality and happenstance define the organization’s culture.

          2. Fernando Gutierrez

            I understand that a nervous CEO is not a good thing. But a CEO should be capable of managing himself in any circumstance and under some pressure. They are humans and they have feelings, but they should be able to bear more than the average human.

      2. John A Arkansawyer

        I don’t see that much discomfort, Fred. Mostly I’m seeing agreement and questioning about implementation details.I’ve already forwarded this to the rest of the board of my church. We recently changed our governance model to put a great deal more power in the hands of the staff, and with great power comes…well, you know.UPDATE (after one person liked this): And now I do see a bit more discomfort.

      3. RichardF

        For me it’s not about discomfort it’s about transparency. I understand a candid conversation cannot happen if the exec team are in the room. The failure to provide feedback when someone knows they are being appraised is a failure in the process.It’s understandable that a group of investors will want to appraise and discuss their CEO however if they are not feeding that back (unless they are intending to boot him out) then you have to wonder why.

        1. fredwilson


    2. sweller

      A person I respect once told me “If you want any chance of success, then your should imagine a world where you will wake up every morning with a 2×4 strapped to your head and everyone else is walking around with a hammer and an unlimited box of nails.” 😉

      1. ShanaC

        When building something- be prepared to get hit on the head. It happens. All the time. It’s also the pleasure of building something. You see after your hands have been roughened up what you’ve built.

        1. Jared McKiernan

          I’m not sure if I understand the purpose of this board/hammer analogy, but it certainly is memorable. Perhaps I’m overthinking it but I don’t see why imagining this would be helpful?

          1. ShanaC

            Just following up on the previous analogy after remembering a time I got hit on the head with my own sculpture while building it…(I literally did get hit on the head, and it was a terrible sculpture.)

      2. Donna Brewington White

        Completely believe in “No pain, no gain.” but I think I have too vivid an imagination for this analogy to be helpful. 🙂 However, I do get it.

  8. andyswan

    This is a very important concept. I’ve run two companies and I can tell you without question that I did a better job when the people around me were free to critique my decisions/actions “behind my back”. Everyone should know that they have to answer to someone.I would even go so far as to encourage those of you with tiny private companies (without investors/board) to create a board and recruit people onto your “board” who will honestly discuss and assess your performance ….and offer alternate possibilities on the direction of your business. Finding a way to tie them into the success of your firm (some free options, whatever) always helps.Get smart people together, get their bias (you) out of the room, and tell them you absolutely expect them to let you know when you’re getting off track.p.s. Yes, I’m available for pvt board seats, and yes…I can be quite abrasive 😉

    1. reece

      Are you willing to accept your options in bourbon?

      1. andyswan

        Quality bourbon has been used as currency for as long as it has existed. Who am I to trample on tradition?

  9. eric_bingham

    strong CEO’s should recognize the value of this kind of session and the rationale for it. After all they spend a good deal of time on similar review of their key team members – performance vs goals, future objectives, compensation etc. A CEO who is not on-board with this may actually trigger red flags.

  10. Brenda Savini

    I fail to see why all involved couldn’t be present. It’s supposed to be business and each person’s goal should be the welfare of said business.

    1. andyswan

      Because in the future, they may want to have a conversation about booting the CEO….and not be subject to his fury if they’re still working under him the next day.

      1. Mark Essel

        That make sense.But if you pick your investors carefully they’ll love any business as much as the founders. Then it’s a matter of business. Worst case they pull the plug or switch up to a guy or gal they think is better suited.Best way to take getting fired from a company you begin, I think Jake said it best in Steven King’s gunslinger series, “there are other worlds than these”

    2. fredwilson

      you can’t talk about someone’s comp or candidly discuss their performance with them in the room

      1. Mark Essel

        Why not?I think this needs to change. Board members shouldn’t feel inhibited by the presence of the person in question. Sure it could get confrontational but it seems likean old school cultural thing. My bosses have never had a problem saying “stop sucking”.Board members represent partner interest and are about the closest thing to a boss a CEO has.What would happen in an exec meeting with a partial board showing? I guess there’s a minimum head count to take action.Does this matter if as a founder you never give up more than 49.9% of ownership?

        1. sweller

          I like your idea, but unfortunately that doesn’t work with about 99% of the A-Type personalities that tend to hold the CEO or other executive positions. In most cases, having those conversations in the same room as the CEO could create unintended ill will. It’s important that the board can openly discuss performance, how to challenge the executive team, compensation and ask questions/brainstorm without the chance their words, questions and thoughts are misinterpreted.

          1. Mark Essel

            Appreciate the explanation Sweller, thanks.

          2. JLM

            A good technique to deal w/ the typical Type A CEO is to ask him to do the following:1. perform a self-appraisal;2. catalog his strengths and weaknesses while citing specific examples of each in the life of the company;3. catalog all the self improvement efforts he has undertaken; and,4. catalog the characteristics of a CEO who is better than him.This takes the hard edge off the ensuing performance appraisal as it helps him understand that perfection is not the objective as nobody is perfect.Just like music, a bit of reflection calms the savage beast (or is it the savage breast?).

      2. Brenda Savini

        Okay, I can see the compensation end, to a point. Performance impacts everyone, and decades ago “I was” the topic of a staff meeting while I was a mere shift supervisor within the fast food industry. I would have known nothing had the assistant manager not told me. Evidently “the kids” would announce that, “Brenda doesn’t do it that way.” to other supervisory personel. I had no idea, that this was occuring or that there was any resentment building from coworkers. And the information given to me was expected to be kept confidential.I believe, to this day that more would have been accomplished had this been discussed openly. I did in turn, “confidentially” tell the teenage staff that they had to listen to everybody, and that wasn’t exactly my place either. Had I not trailed after the kids, what results would this meeting have produced?I also would not have taken offense had this been brought to my attention, openly. I did though find the secrecy offensive.P.S. It was also pretty flattering to discover that I had made such an impact with the workers.

      3. JLM

        A well orchestrated Board should always have a separate Compensation Committee.

  11. Mark W

    As a first time CEO, this is standard practice at my company, it’s on the formal agenda for each meeting. If you are looking to improve as a CEO you need feedback, and this is how that feedback gets created. And – the board is going to talk about you anyway – might as well make it efficient, convenient, and right after you’ve discussed all the issues in a comprehensive way.

    1. fredwilson

      that is very smart of you to realize that

    2. Mark Essel

      Plus if things aren’t going well, you can drag the meeting late so the board members get sleepy 🙂

      1. Mark W


        1. Donna Brewington White

          Off topic: Just clicked on your site. What a find!

          1. Mark W

            Thank you!

  12. Doug Covey

    Smart post and why organizations who don’t practice this approach fall into dysfunctional teams: Absence of Trust + Fear of Conflict + Lack of Commitment + Avoidance of Accountability + Inattention to Results.

    1. JLM

      OK, so we read the same book but it is a good one, is it not? A bit of psycho-babble pop business “wisdom”. Dysfuntional teams anyone?

      1. Dave Pinsen

        A dysfunctional team — is that one where the coach puts a Peyton Manning-like QB at CB, because, as you opined earlier in the week, great QBs also make great CBs and WRs?Seriously though, I’m curious what your opinion of “executive sessions” is, given your thoughts about full disclosure (of comp, etc.).

        1. JLM

          I concede the point on CBs but the WRs are your boy! You’re being a bit tough on me but I can handle it.Meetings of independent directors (all directors save management directors) are not only advisable, I think they are imperative. I think they should be held at the beginning of the day before the Board meeting.CEOs should be calm about this. After all the CEO meets with his management team separately from the Board.Just like there is good management and bad, Boards have a performance profile all over the map. A Board Chairman should make the Board work hard.Board members sometimes think they are “heat in the seats” when they need to engaged.

          1. Dave Pinsen

            I’m tough but I’m fair.Thanks for your insights about the executive session.

      2. Doug Covey

        I’m a bit of a sucker for end cap title catchers pop business “wisdom” and all. Still chuckle at his latest “Getting Naked” perhaps he believes in the adage sex sales for this one.

        1. JLM

          Hey, count me in. I find that there are a great number of pop business “wisdom” books which simply commit to writing what my instincts have been propelling me to do through the years. I love the ones that are written like a fable like the entire Patrick Lencioni series.I routinely read them and try to get their essence adopting and rejecting whatever I think and then I have my senior execs read them. It makes the changes much easier.A good one I just read is “The Checklist Manifesto” by Atul Gawande (I want a mulligan on the name and author’s spelling, but I think it is close).I have been organizing mildly difficult business processes into checklists and Visio flow charts for years — it comes from my training as a private pilot.At first, it seems a bit elemental until someone catches themselves just about to figuratively “take off” with the door open or some such other figurative nonsense.Funny also is that SOx 404 is just the same thing wherein companies have to identify, catalog, document their critical financial processes and essentially develop a schematic with a checklist. This from the freakin’ SEC.We did this a couple years before we were required to comply by SOx and we did such a good job of it that our auditors use it to instruct their other clients.For the record, I did NONE of the work personally and all the credit goes to my CFO but I broke him to the bit.

  13. Dan Ramsden

    Not to get crazy, but I wonder if there could be a similar tool for board members to determine their own or each other’s performance. Perhaps this matters less as they represent ownership. In VC world though, CEOs also have ownership, and in many cases accepted new owners on the premise of value-add.

    1. fredwilson

      there should be

    2. Mark Essel

      Nice Dan, the reverse 😉

    3. sweller

      1. Dan Ramsden

        Not really. That’s often a platform for entrepreneurs who fundraise to spew venom. My suggestion relates to companies that have already been funded, and the extent to which board members should also be assessed by other board members (and management). In an early stage platform, everything matters – the CEO, the rest of the team, the VCs, individually and collectively – so singling out the CEO (although I do understand the rationale) is still only half of the picture.

    4. JLM

      The Chairman of a Board should conduct an annual Board Survey to obtain the insights of the Board as to its own performance. The Survey should ask tough questions.The Chairman of a Board should conduct a strengths/weaknesses assessment of the composition of the Board on an annual basis and these strengths and weakness should smoke out any holes in the Board’s expertise as well as the manner in which it deliberates and resolves conflict.Boards have an “effectiveness quotient” which either makes their contribution a force multiplier or is just a waste of time.This is the duty of a good Chairman and why you want a guy with a bit of saltiness.If you do these things once, you can use that exemplar for the rest of your business career.

  14. kidmercury

    hey boss, slight tangent, but if you ever did a post on fiduciary duty and what that means to you, stories you have about it, etc, i think that’d be great. i bet it’s great fodder for beefs.

    1. fredwilson

      i should do that

      1. Alan Warms

        when you do that one (which i agree would be awesome) definitely talk through the gradations involved in voting as board member, vs. voting your shares and what Delaware law means wrt – be great to see your perspective

        1. fredwilson

          tricky stuffmy view is you always have to be a fiduciary first and a shareholder secondor don’t be on the board

          1. Alan Warms

            Agreed, and often overlooked (and sometimes forgotten)

          2. Jared McKiernan

            Great idea for a post- looking forward to hearing Fred’s take on fiduciary duty.

          3. JLM

            Not even a close call. Asolutely correct.

          4. RichardF

            It’s not a close call but unfortunately in some VC backed companies it is a real issue.Possibly it reflects the level of control and influence that some VC’s desire in an investment.

          5. JLM

            Control is a funny thing. Sometimes folks confuse control with influence.The ability to influence the outcome of any “team sport” is often the result of expertise, style, wisdom and leadership.If you can match the right Boardmember with the right CEO and they can enjoy a symbiotic relationship then the ability to influence the future makes controlling the future irrelevant.Not to be too crass, but having made it to the pay window a few times has enlightened me to measure almost everything by making money. Gobs of money.When measured by that yardstick diverging interests seem to reverse course and converge. When a guy is willing to lose money to be “right” the only part of me that remains is my shadow. I am long gone.We can all do good works with our money but first you have to go wrestle some out of the marketplace.Everybody else can have “control” if I can exert a bit of “influence”.

          6. karen_e

            Another great hidden post by JLM.

    2. Tariq

      That would be an awesome post.

    3. Gorilla44

      This is often so misunderstood by inexperienced board members. I had a major problem with this issue with some angel investors who were on the board of my last company. I thought lawsuits were going to start popping up like weeds after some of the crap they pulled.At my current company I addressed this head-on at the first board meeting to make sure that all directors understood their fiduciary responsibilities. There is an excellent document that talks about the board and their role:”THE BASIC RESPONSIBILITIES OF VC-BACKED COMPANY DIRECTORS”…I’m sure Fred knows a number of the authors.

      1. JLM

        Excellent resource but it is very interesting to me to see how slanted this is toward the needs of the VCs rather than just solid corporate governance. I am a bit surprised as it seems a bit obvious.I am a bit more removed from that environment having run fairly large private companies with foreign investors and therefore very disciplined corporate governance and having run a public company for over a decade.I just don’t see the same degree of difficulty even in a difficult economic environment.Folks seem to be making this way more difficult than it really needs to be or it really is.

      2. fredwilson

        thanks for that link. one of the people who taught me the venture business was a lawyer turned business person. he schooled me early and well about fiduciary duty. it’s super critical.

  15. PhilipSugar

    The alternative: clandestine discussions is much worse.

    1. zackmansfield

      agree wholeheartedly – if there truly is an issue the conversation is happening in some shape or form anyway.The unspoken element here is that any real *issue* that would arise re: executive session is when the CEO/Board have a fundamental lack or breakdown of trust with each other. In this case, the issues far exceed any hurt feelings about having a formal executive session.

  16. smartone2

    I think boards avoid executive sessions because in the end how can a board objectively judge a CEO since they are the ones that hired the guy? If the CEO and or company is doing poorly it reflects on the board just as much as the CEO.

    1. JLM

      This is why an Employment Agreement or a Basis of Employment and a Job Description with written goals are so important to define the relationship between a Board and the CEO.It should not be allowed to become personal. Expectations can be allowed to evolve.

  17. davejeyes

    Where’s the transparency here? If there’s a problem with the way the company is operating, it should be brought to the attention of the people responsible so they can address it.

    1. fredwilson

      that’s exactly the point of the executive session. to get consensus so it can be shared

  18. Mark Essel

    So the board is the group that fires a CEO that’s not doing their job. Why not communicate openly to the person running the company? If it’s not going well the CEO will be the first to know. If they’re not then replacing a CEO is the least of the board’s problems.Bah, boards and their secret meetings.Who watches the watchmen?

    1. Mark W

      The point of an executive session is for the board (excluding CEO) to have a discussion about the CEO’s performance, and the company’s performance, with the freedom of not having the CEO in the room. Remember it’s a group, so there are divergent opinions that may have to be reconciled. Once the board finishes the discussion, the output of that discussion is absolutely communicated to the CEO afterwards, often by a designated member of the board.

      1. Mark Essel

        Thanks Mark for the clarification. It’s a free country anyone can meet any time, certainly a few folks that share ownership of a business. I can’t argue with the rational either. I guess the board has to find a solid replacement for a floundering exec. That can’t be an easy job to fill.

      2. JLM

        Let me take a tiny bit different slant on things. When you have a seasoned and salty Board with a few fellows who have been to the rodeo before, the right tone to take is that of a ball coach.I once had the most biting criticism ever leveled at me — completely well deserved — delivered by a white haired multi-millionaire served up as follows:”You know, Jeff, I have seen this done before in a little different manner…might be worthwhile to consider it.”What followed was just a chat but I quickly got the message and I desperately needed that bit of coaching as I simply had it all wrong. Totally wrong.Years later, we laugh about it because he told me that if I did not get the lesson, the Board was going to fire me. I still don’t know if he is kidding but I suspect not.There is value in experience and the manner in which criticism is delivered. A bit of gray hair, a courtly manner, the ability to deliver a tough message in a gentle wrapper — these are skills that every Board should look to include amongst their members.

        1. fredwilson

          when someone with 20 years of experience on me says “might be worth considering it”, i stand up straight and say “yes sir”it’s the military upbringing i think

        2. Mark W

          Well said.

        3. Elie Seidman

          Great thoughts in this comment and the many others above. One of the things that is not discussed much in this thread though is that one of the challenges that company’s face is that not all directors are created equal and that while creating more added value is a challenge for companies fortunate enough to have great directors, many companies are trying to mitigate the negative impact of neutral or bad advisors/owners (Steve Blank mentions the problems of inexperienced investors frequently –…. For every director like Fred who thinks deeply and insightfully about consumer web companies, there are many directors/investors who at the end of the day are neutral or negative influences on a company. I’ve personally been fortunate to work with some fantastic advisors and investors (I sat on a board with David Strohm of Greylock and was consistently wowed by his insight) but have also worked with directors who destroyed a lot of shareholder value by talking about things that they understood not at all; they had control and they used it but they should not have because they were not the ones in the best position to make a good decision. Unfortunately, bad “ideas” from board members often become directives for a CEO, unless that CEO is in control which is rare unless they are the founder/owner and even then, a well meaning CEO who does have control but who does not want to offend or is not as sure of her own vision as she should be, can lose faith in their vision under the pressure of this “advice”. In reading the book Googled, I was struck by how even a board member as great as Mike Moritz (given his amazing success, he’s at least perceived to be great – I’ve never interacted with him) was, along with John Doerr, giving some advice to Google that, had it been followed, likely would have negatively impacted Google in quite material ways. Many others have written about how it’s not an accident that so many truly great companies have been built by their founders. While there are clearly great CEOs available to be hired, and many founders are, in fact, very much not up to the different challenge that scaling an idea is from creating an idea in the first place, it’s just hard to replace the power of a visionary founder. It’s even harder for outside directors who are thinking about the business intermittently at best to consistently offer great strategic advice. Wrapping this all up with a question: Considering the limitations of knowledge and experience that most boards – particularly those of early stage companies where in addition to the founder possibly being inexperienced, often the board members/investors are as well – how do you find the right stasis where the board offers value add but is not in a position to destroy value? This post started with Fred’s suggestions on ways that boards can improve their value add to the company but I think that for many CEOs and founders, one of the challenges is not how to leverage great board talent into improving things but rather to mitigate the negative impact that an inexperienced board might have. Curious to hear your thoughts. I’ve seen plenty of “interesting” board situations over the past 10+ years of entrepreneurial endeavor. I know you’ve seen countless more and in higher stakes situations.

          1. JLM

            Great questions all and evidence of real thinking.I guess I fall into the perhaps naive view that people — even whiz kids with mousse in their hair — are generally well intentioned. The challenge then becomes to appeal to their better angels. I have been disappointed a few times but I have also been pleasantly surprised more times than not. Many more times.I once listened to a smart ass impassioned rant from a typical young Ivy MBA at a Board meeting of a company on whose Board I served. It ended with deathly silence. I then asked him: “OK, how much of that bullshit do you really believe?” Everybody erupted into laughter and thereafter when everyone spoke, somebody would ask the speaker the same question. The laughter completely disarmed the situation and we were able to work through the issues and the company — which had been on the brink of disaster — ultimately thrived.It was good because the only trick I had left in my bag was to take the mousse man out into the parking lot and knock some sense into him.So the short answer is to do your best to assemble a Board composed of a mix of ages, business experiences, areas of expertise and energy levels.I would give particular attention to finding someone who has a few bucks in the bank and is not financially invested in the company and therefore can provide you with unbiased advice. These guys are not as hard to find as you might think. The age difference can also blunt the brashness of the young VC type. It is like putting a bit of lime into the mortar mix to make it a bit more pliable.Force the Board to follow strict corporate governance formalities including the formation of an audit, compensation, nomination committees. I would shy away from “operations” committees.Make the Board erect some internal hierarchy (Chairman, Vice Chairman, committee chairs, SOx required “financial expert” on the audit committee, etc) and over the years rotate the positions so that everybody who is qualified gets a shot and those who are not qualified can develop a bit.Force the independent directors to have a separate meeting before the Board meeting.Have a strict policy as to attendance, no cell phones, no computers — full attention and then return the favor by having the Board books out on time, the book well organized and full of info including things which will not be discussed and providing as much info in graph form as possible.Require a Board Retreat and make use of it as a brainstorming session — something which I think we all need more of. This is where we are forced to look beyond the horizon. You will never find “vision” reading a Board book. You have to, at the very least, tilt your head toward the horizon to even think about seeing over it.Maintain a cordial and “business personal” relationship with as many of the Board members as you can. Go take somebody to lunch once a month and just get to know them. Ameica does business with its friends, go make friends.When you have a bad Board member — confront them, ask them nicely to mend their ways, escalate it to other Board members if it does not get better, ask them to resign if it does not improve. You have to cowboy up, particular if it is your company.I had to ask a Board member to resign — a potentially very good Board member — when he lied to me about how he had been recruited to serve on the Board. He had been recruited by a member of management which is strictly forbidden under SOx. I ultimately had to get rid of him and the recruiter.

          2. Elie Seidman

            Thank you. Very helpful.

  19. Tariq

    This is a pretty good idea – I think a lot of times, the expectations of board members might not be very clear so you end up without interactions like executive sessions. This is especially true if the board is made up of people who aren’t all investors in the company. It is a bit of a disappointment because a good board can really help the CEO and company, especially with long-term strategy / less day to day stuff.But if the expectations aren’t made up front, you will end up with a board that might not do a whole lot. They might just show up for mandatory meetings and clock out after their appearance quota is up. As a result, they don’t end up contributing as much in terms of guidance and advice as they should.

  20. sweller

    Fred: I assume it’s like herding cats to get consensus on anything post board meeting, so maybe this wouldn’t work… But… Would a web app that allows board members to have (and record) executive “session” discussions on the fly would be useful?

    1. fredwilson

      i think face to face is best for these kinds of discussions

    2. JLM

      An application which would be excellent for a company would be to have all Board meeting materials on a website in addition to producing a Board book. This allows the Board members to study materials prior to the meeting on the run and makes a nice archive thereafter.

  21. tedstr

    As a member of senior mangement at a couple of different startups over the years, I have been at many board meetings with executive sessions. My sense is that this is one of those things that sounds right and neccessary, but something about it is not right in reality.The fact is you are there, talking behind someone’s back in front of them. In faact you ended one thing with the purpose of doing this. I usually felt uncomfortable and I felt uncomfortable for my boss the CEO.I suggest that executive session board meeetings are neccessary, in fact the board would be remiss if they did not do this, but having them contiguous to a board meeting simply flies in the face of consideration for others on a number of levels.

    1. fredwilson

      i get your point. but the entire board is there face to face right then and there. reconvening is hard between scheduled meetings. this is where its best to be pragmatic

  22. Joebob

    This makes sense at a later stage company particularly with a “professional” CEO. At a Seed or A round company with a founder CEO this is blatantly pro-investor advice. Help is welcome, but being fired by a company you started and majority own is not. The best practice is to adjourn the board meeting and encourage the investors to talk amongst themselves as you leave the room. Any CEO who walks out on a board meeting that is still in session risks losing their company.The other best practice is to get office space with only metered parking available.

    1. PhilipSugar

      Like it or not the discussions will happen. They can either happen in an atmosphere were everybody is conformable i.e. after the board meeting or via backstabbing clandestine calls.I don’t believe in professional CEO’s, I can’t find the post, but somebody had one where they point out there was only one great tech company built with an outside CEO….Cisco.As to a CEO that owns a majority of stock….as long as you don’t run out of money, the only way to get displaced is to be bought out. Sure you’ll get some VC’s that like to get their own person in there for control but the only way is to buy that privilege.

        1. PhilipSugar

          Thanks. Yes. I really like his writing. No disrespect to Eric Schmitt but I think Google was already great.

    2. fredwilson

      i disagree. executive sessions are not usually about firing anyone. they are most often about compensation and feedback and hiring issues

  23. Shurtleff

    Fred one tag on, There needs to be a chair, and the chair’s job is to both help run the board meeting, but much more importantly to do the official connect back to the CEO after the executive session to pass along any important feedback. One person should do this, the person responsible for writing the CEOs review, the Chair.

    1. fredwilson

      right, but so many CEOs these days are also the board chair

      1. JLM

        A dangerously weak policy. Forbidden, discouraged under SOx for public companies. A very bad practice.

      2. Shurtleff

        and having the ceo do both jobs in my book is just plainly a bad idea. a bad idea in big companies, a bad idea in start ups and non-profits for that matter. a good Chair can be a real plus for the CEO, the company and the board.

        1. Donna Brewington White

          What do you think of the role of non-executive chair? Do you see value in this?

  24. michaelmurray

    Certainly a lot of discussion about “comfortable and uncomfortable” re: exec sessions. I am for Exec session for the simple fact that it provides an open environment for those that have a vested interest in the success of a venture to discuss a key component of that success — CEO leadership and performance. Most important is that the loop is then closed. If there is no issues — communicate that. If there are — communicate that. Both in a timely fashion.IMO – any CEO that is surprised is not keeping his finger on the pulse of his advisory through open one on one communications that happens in the vast amount of time in-between board meetings. I’ve found if on-going dialog is weak, Exec Session comfort goes down (for all) and surprise goes up. Bad combination.Last, I get type A personality (being one), but as a CEO, if you are not their to leverage the strength of your board, as it applies to all aspects of the business, including your role, then you are wasting a valuable asset.

  25. Wil

    Question: if this occurs at the end of the meeting, what’s standard procedure for the resulting feedback to make it back to the CEO? A 5-minute regroup of the full board after the executive session?

    1. fredwilson

      usually the chairman (if they are not the CEO) or one of the board members talks to the CEO after the meeting

    2. JLM

      I think they should take place BEFORE the meeting fo rthis very reason.

  26. Colin Devroe

    I server on the Board of Viddler, and am an executive at the company, and have subsequently asked the board to add these sessions to the end of our board meetings.Thanks for the nudge.

    1. fredwilson


  27. David Binetti

    CEOs afraid of implementing an Executive Session should realize that there will be at least one that takes place without their approval — when outside of the office the Board Members cobble together their plans to oust him/her and find a replacement. The more receptive a CEO is to criticism (and resultant course-correction) the more likely Exec Sessions are to be constructive and not destructive exercises.

    1. JLM

      Actually the Chairman of the Board should be the one insisting on a meeting of the independent directors. It is his Board not the CEOs. The By Laws will require a Board.

  28. ShanaC

    So here is the question- beyond the board sitting around and discussing the management- shouldn’t they be also talking to everyone else in the company in this formal get together without the CEO and Management to see that everyone is on the same page? I mean oftentimes, there is distributed layers of knowledge, and the guy/gal who really knows what is going on is not going to be the board member, the CEO, but instead the random programmer/secretary/customer support person who will be able to know the most about some nuance of the company where it needs to bounce and does direct impact comp and what the Senior management misses??? How do you get those people empowered as a company grows?

    1. fredwilson

      that’s a tricky place to go without the CEO’s approvali like a real 360 review process to get everyone’s feedback

      1. ShanaC

        I know- yet that is why I asked…

      2. Donna Brewington White

        Love this post — and the comments are classic AVC!In your experience, do many of your portfolio companies use the 360 review? Seems like the insight gained would not only be incredibly valuable to the CEO and leadership team, but also to the board/investors. Do the boards you are part of use insight from the 360 in managing/coaching the CEO?I learned the hard way in recruiting that if I truly want to understand a company (especially startups and other smaller settings) then I need to talk to others in the company besides the CEO whenever possible for a truly accurate understanding of the internal dynamics — and especially in understanding the CEO’s management/leadership style (including strengths/weaknesses — although I don’t ask point blank what the weaknesses are).I wonder how many companies would still be in business today if the board/investors could have done an early intervention or provided coaching for problems that were “common knowledge” internally long before they became more overt or influenced the bottom line — which eventually it seems they tend to do.BTW, I wish the nonprofit boards I served on had done executive sessions as a matter of course and not just when there was some sort of crisis. But I wasn’t reading AVC then.

        1. fredwilson

          i am a huge proponent of 360s. not all of our companies use them but when they get to a certain size, i really push them to do it.

        2. JLM

          Non-profit boards are a unique and wonderous phenomenon. I have served on lots of such boards and they are both fun and draining at the same time.I usually wind up being the guy who gets the numbers in order and provides some financial discipline — which means I am usually very, very unpopular.The most such fun I have ever had was being the President of a fairly large city’s musical theater Board and serving on the foundation Board of a military academy w/ a significant endowment.I have overseen blood feud debates as to how many pieces to have in the orchestra pit and between 4-star Generals on whether cadets should read Kipling.One can only laugh to keep from crying.

    2. JLM

      A well constructed Annual Company Survey promulgated by the Company and lead by the CEO will smoke out those issues. The emphasis is on “well constructed”. You will want to ask a lot of ‘normal’ questions but the ones following will give you the best insights.”If you were President of this Company what are 3 things you would initiate immediately which are currently not being done?””What do you think I should know that I apparently do not know?””Tell me 3 things we are currently doing which you would immediately discontinue and why.””Who is this Company’s MVP and why?””Who is the Companys’ biggest knucklead and why?”Ask those kind of questions and take the answers anonymously and catalog the answers into a single continuum and then meet with a cross section of the company from every level and you will learn some very interesting lessons.You will also have a blast.I look forward to our Annual Company Survey every year and I never fail to learn something.

      1. ShanaC

        Thanks JLM. As always, you have words of surprising wisdom.

  29. Michael F. Martin

    I love transparency — Brandeis had it right when he said that sunlight is the best disinfectant. But when transparency becomes an obsession — as I fear it may have become now — we overlook some of the benefits of privacy. Thanks for this post. Caucusing in general is an underused mechanism for resolving collaborative goals into a single focus.I’ll give you an historical example, which supports the argument Fred makes here: The Constitutional Convention was closed to the public. There would probably be no Constitution had it been open. Privacy — at least while the ideas were nascent — was essential to achieving compromise. In fact, it was enough to hold the North and South together for much longer than any of the folks in the room would have guessed.

  30. Brian Armstrong

    What is an executive session??I found this strangely missing from the post 🙂 From reading between the lines I’m guess it’s to evaluate the CEO’s performance. But just thought I’d point it out since not everyone (including myself) is familiar with this term.

    1. fredwilson

      i am sorry about thatit’s a meeting of the board without the executives in attendance

      1. Brian Armstrong

        Much appreciated!

  31. paramendra

    Rename it, maybe?

  32. JLM

    I view the world from the perspective of a CEO first and an investor thereafter. So, my comments are colored by that perspective. Even when I serve on somebody elses’ Board, I still think like a CEO.First, any CEO, new or 30 years experience, should have a contractual relationship (Employment Agreement/Basis of Employment and Job Description) with the company that employs him and it should spell out many of the things which are discussed in this blog post and the comments.The Board is the employer and the CEO is the employee and the relationship between them is set out in writing in the Employment Agreement/Basis of Employment and Job Description. The Job Description is a dynamic document and should be revisited at least once a year. Goals, objectives, incentive comp hurdles all should be in writing.A good Board should have a good discussion and define exactly how it intends to discharge its duties. Discussion should include how to conduct meetings, model agenda, time budget for agenda, policy on parking lot issues, brainstorming, CEO performance appraisal and a million other important details. This should ideally happen even before the first Board meeting and it should be committed to writing. Boards should not be passive they should be active.The Board should have formal audit, compensation, nomination committees and a succession plan for the Chair, Vice Chair, committee heads. Board members should rotate through their duties over the years so everybody gets cross trained.The Board owes its fiduciary obligation to all of the shareholders and nobody else even if they are in essence in conflict with themselves. Tough!A Board meeting should be orchestrated like a parachute assault. Everybody arrives at the right time having received their Board info 72 hours earlier including an agenda with a time budget for each item. Everybody is ready to get into the fight as soon as they sit down.Only the core business of the Company should be discussed at the meeting and in the order of importance with the most important things being discussed first. There may be things in the Board book which are not discussed but Board members should know about them. Anything not resolved goes into the parking lot.A Board member should never have a computer on or a cell phone turned on. If you cannot give your undivided attention to the Board meeting, resign. No exceptions. No leaving the room to take or make a call. Get over yourself.Boards make policy and CEOs implement the policy. The CEO is THE MAN until the Board says otherwise.Under SOx, independent directors of public companies are REQUIRED to meet separately in the absence of management. No CEO should ever be concerned that the independent directors meet without him and the independent directors should not be falling all over themselves to make the CEO feel good about what was discussed. CEOs should be a bit tougher than that.Before every Board meeting, the independent directors and all committees should meet. Private companies are well served to embrace the disciplines of public companies because of the implied “safe harbors” created thereby.CEOs should be given and should demand an annual written performance appraisal, a meeting w/ the comp committee and a separate single purpose meeting w/ the entire Board to discuss his performance. This is as important as your personal annual health physical. Do it. It makes for a healthy relationship.Boards should look a CEO in the eye and tell him — your job is perfectly safe, you are on the ice, you could be terminated or you could be terminated for cause. Any CEO worth his salt should demand such feedback from the Board. It is cowardly to do otherwise.Board members meeting w/ subordinate members of the CEOs direct reports? Not in my company. Not in a million years.Conduct an annual company survey, an annual Board survey and a strengths/weaknesses assessment of senior management and the Board. The Board does not get a free ride as to its performance. Some Board members need to realize that they have duties, important duties, and they need to be graded on their own performance.Any Board member who misses two meetings in a year, I ask to leave the Board.If you are in it to win it, you operate like an adult and deal with the realities of performance face to face. Cowboy up!

    1. fredwilson

      that’s just incredible JLM. so spot on. would you sit on startup boards? in particular ones that are getting to the stage where they might go public?

      1. JLM

        Sure, if they were interesting and easy to travel to from Austin. And if there was good fishing nearby.

        1. Elie Seidman

          I can’t offer much fishing but if you are ever in NYC, I’d like to buy you a drink and pick your brain.

          1. JLM

            Long Island Sound some of the best striper fishing on the planet?I get up there from time to time usually about 4-6 times per year.Send me an e-mail address or a phone number.Jeff 512-656-1383

          2. Elie Seidman

            elie at oyster dot comLooking forward

        2. Scott Barnett

          JLM, your comments seem suited for a larger (public?) company rather than a startup, although I agree with many of your comments. Would/could you re-address for a startup company (let’s say less than 25 employees with just one level of mgmt under the CEO)?Also, I’m curious where committee meetings fit into this. I’m all for Fred’s idea, but by the time you finish the regular board agenda, committee meetings, who has the energy to then pick apart the CEO? 🙂

          1. JLM

            Scott, I started out my biz career (after the Army and an MBA) working for the CEO of a Fortune 3 company as his personal flunky. I used to set up the Board meetings for the company back in the day (before the days of personal computers and e-mail) and I was always struck by how very “ordinary” we are all. I have had a lot of time to study Boards.There are no extraordinary men, we only have ordinary men who rise to the ocassion in extraordinary circumstances. Eisenhower. Peter Lynch. You. Me, hopefully.I thereafter never worked for anyone else ever again and was always an equity guy willing to struggle and starve for all the points of equity I could get and living on my assets. I always wanted to be the guy in charge and only wanted to eat what I could kill. It is my perhaps fatal flaw. I have evolved into literally the worst employee on the planet though I work so hard and long I am right at minimum wage.I share this with you because though I envision myself as an eminently fair fellow, I am on the side intellectually of the entrepreneur, the CEO, the struggler, the ordinary guy in the extraordinary circumstances.I think you have to practice like you eventually want to play whether you have a 10 man company or a 500 man company. You have to run the business and insert the disciplines of the company you want to BECOME not the company others tell you you are.I always remember raising money at the Plaza and eating $15 scrambled eggs when I was dead broke cause that is the way the money game was played in those days. I got the money even though I often sweated whether my credit card would be denied.25 people and a CEO and a Board are big enough to do it right.I think that a CEO can position himself in the money game and with his Board in a very strong position if he is well organized and uses his expertise to influence the nature of the communication, the conduct of the contact and demands feedback and performance appraisal frequently.As to the mechanics of the meetings and the time involved, it should take 3 x as long to prepare the material as it takes to discuss it. The committee meetings should take no more than 15 minutes except when the audit committee is dealing w/ the auditors. The committee meetings should take place before the Board meeting including the independent directors meetings.This can be done if everybody studies the materials, arrives on time, turns off their computers and phones and gets down to work. Do not let them shoplift your time. Your time is the most valuable asset.No Board meeting should take more than 4 hours plus lunch if the prep has been done correctly. Make it so.At night when you lay in bed at that quiet hour before nodding off and your mind is still churning, most of your Board will be thinking about some trip and that mischievous little pinot noir they just had with Chilean sea bass. You will be working the business. That’s why you are the CEO.Most Board members could not operate their way out of a paper bag. You are the man and you can make it happen if you do not take counsel of your own fears.Nobody ever started a business to stay small.

          2. Scott Barnett

            I couldn’t agree with you more on the personality of an entrepreneur. I’m right there with you – continually telling my wife I’ll get “tested” for whatever malady has me working like crazy for less money hourly than most. The thrill of building something from little or nothing is the biggest high I’ve ever experienced.I also agree that you should think and act as to where you want to go, not necessarily where you are today. But there are limits to that, for a startup. I’m not sure I can agree with you that a startup should spend 3X as long to prepare as to discuss – I don’t want my time spent preparing for board meetings, I should be preparing for running and leading the business, and if I’m doing it right and managing the right metrics, then the information for the board should simply be a subset of that and “easy” to share. My experience has been that committee meetings usually happen after the board meeting, but I like your idea and if you pin Fred’s after the meeting, you get everything done. I’m working on keeping my new company’s board meetings to 2.5 hours + lunch – I think it’s important that the board get to know each other as individuals in addition to board members. I also think it’s critical to speak with your board in between board meetings – one of the reasons I see meetings run so long is its the only time the board gets to interact with the company, so they feel they have to ask all their questions in one shot. If there is periodic (but not overbearing) communication with the board in between meetings this doesn’t happen as much.The fact is there are a lot of team dynamics at a startup that need to work well – inside the company, with your partners, and with your board. Similar to the rule that you don’t manage everyone the same way, the effective CEO must figure out how to build each of these teams, typically using different tactics and strategies to bring out the best in each. Visibility, trust and honesty are required for each for sure, after that, it’s all in the personalities.Thanks for your thoughts and feedback. You add tremendous value to this blog.

          3. JLM

            Scott, I bet you are talking about monthly meetings and I am talking about quarterly meetings.I pay my Board $20K plus options. I can therefore demand a bit more. I have a Board composed of 3 Wharton MBAs, 2 Standford opns mgt degrees, 2 CPAs, 2 UT MBAs, 1 UT statistics masters and a CFO from a big company — spread over 6 persons. Pretty strong Board and well experienced. One guy is a CEO himself and another is a fund manager who has a challenging portfolio and is managing a huge amount of money far bigger than most VC funds. Fairly salty bunch and not too much mousse though a few iPads.I like 4 quarterly meetings, an annual meeting and a Board retreat. Two minutes after the annual meeting, all positions (Chair, Vice Chair, Financial Expert) and committee assignments are finalized for the next year.Again, I get all committee and independent director meetings completed (8-9:00 AM, coffee, breakfast tacos, sometimes even the Burnet Road Burrito) before the Board meeting (9:00 AM) as they are all pretty spent when the Board meeting is done and I want to know about anything that comes out of the committee meetings.Anything unresolved goes into the “parking lot” for next meeting.I also send them interesting pieces of work (only those that are of near policy implications) regularly and I try to have one face to face or long conversation between meetings.The day before the Board meeting I like to take my most energetic Board member on a 6 mile walk and then to a very casual dinner. Kind of like riding your best horse hard the day before a long trip and getting all that spunk out of it.It sounds to me like you are on the right track.On another note, it only gets better as you become more and more accomplished. The big difference is that on the 3rd one, you actually know what you are doing and then you “audition” the money rather than “raise” it.Good hunting!

          4. Scott Barnett

            Exactly, we meet monthly right now. You seem extremely organized, I aspire to that level! I’m trying to do what you suggest (send board packet out early, insist on feedback/response, etc) and will focus on that as we grow the business. Thanks for the advice, very helpful.

          5. JLM

            One small point. Once you get the Board agenda exemplar down tight, don’t do a bit of work yourself to prepare for the Board meeting.Divide the info between “actionable” or “info needing to be discussed” and simple information which is useful to know that does not really have an impact on the core mission of the company.The actionable info is financial reporting, operational reporting, metrics which drive the business, cash burn, capital transactions, acquisitions, capital spending, things which can kill us. I use RED tabs for this stuff.The other info is staffing, regulatory, legislative, litigation, capital structure, etc, etc, etc. I use BLACK tabs for this stuff.Make the CFO prepare the Board info for your review at 7 days out and send to the Board so that it arrives at 3 days out. Make them acknowledge receipt and let you know if they are going to be able to review it before the meeting.I am slowly but surely transforming the info into a web based repository of info thereby getting rid of the physical requirement to actually send books.

    2. karen_e


  33. paramendra

    The Feedburner count is back to 90K. The dip yesterday to 35K was curious.

  34. Joe

    I agree Fred. The executive session is an important habit to get into. It is a time when all directors are there in person and can table their views and have them challenged by other board members without impairing their relationship with the CEO. Most importantly, to me at least, is when the company is struggling or the Board is beginning to become disaligned on their support for the current CEO is a bad time to request the Board’s first executive session. Talk about uncomfortable.

    1. fredwilson

      you have to close ranks. without consensus, you have chaos.

  35. LD Eakman

    The “in-camera” meeting is a core component of governance proposed by LPs in the ILPA Principles. The GPs hate it too! As to fiduciary duty, VCs (and their attorneys) negotiate hard to limit their fiduciary duty to their own funds? Doesn’t make a lot of sense.

    1. fredwilson

      well its one thing whats in the contract and another what is our intention. i am sure you know this lindel but we take our responsibilities to our funds and our investors very seriously.

  36. Tom Evslin

    This applies to non-profit and quasi-government-agency boards as well – and is just as rarely practiced there as in the private sector. When an executive session is NOT the practice, then it becomes a distinct threat to the CEO or executive director – which may or may not be warranted – when some board member does ask for an executive session. Small problems are allowed to fester and large problems don’t get dealt with on a timely basis.

    1. fredwilson

      hey tom. long time no speak. i was on your blog recently though. i miss you. we should catch up.

      1. Tom Evslin

        Will be reemerging in the wider world as soon as the Vermont legislature adjourns – hopefully within two weeks. Look forward to being back in touch,

  37. greggdourgarian

    How do you get “oxymoron” out of “Executive session”? I could see “misnomer” or maybe “pleonasm” …

  38. Scott Barnett

    I couldn’t agree with you more on the personality of an entrepreneur. I’m right there with you – continually telling my wife I’ll get “tested” for whatever malady has me working like crazy for less money hourly than most. The thrill of building something from little or nothing is the biggest high I’ve ever experienced.I also agree that you should think and act as to where you want to go, not necessarily where you are today. But there are limits to that, for a startup. I’m not sure I can agree with you that a startup should spend 3X as long to prepare as to discuss – I don’t want my time spent preparing for board meetings, I should be preparing for running and leading the business, and if I’m doing it right and managing the right metrics, then the information for the board should simply be a subset of that and “easy” to share. My experience has been that committee meetings usually happen after the board meeting, but I like your idea and if you pin Fred’s after the meeting, you get everything done. I’m working on keeping my new company’s board meetings to 2.5 hours + lunch – I think it’s important that the board get to know each other as individuals in addition to board members. I also think it’s critical to speak with your board in between board meetings – one of the reasons I see meetings run so long is its the only time the board gets to interact with the company, so they feel they have to ask all their questions in one shot. If there is periodic (but not overbearing) communication with the board in between meetings this doesn’t happen as much.The fact is there are a lot of team dynamics at a startup that need to work well – inside the company, with your partners, and with your board. Similar to the rule that you don’t manage everyone the same way, the effective CEO must figure out how to build each of these teams, typically using different tactics and strategies to bring out the best in each. Visibility, trust and honesty are required for each for sure, after that, it’s all in the personalities.Thanks for your thoughts and feedback. You add tremendous value to this blog.