Booze and Board Meetings What's your Club's Policy? |
| One thing is for sure; it often plays a significant role in our lives, and that of the private club industry. Sometime more significantly than we want. Alcoholic beverages, whether a bottle of beer, a scotch and soda or a glass of wine are commonplace in private clubs. In fact, the sale of alcoholic beverages in many cases, is a major contributor to a club's revenue. |
| However, there are times when the use of alcohol is appropriate and times when it is not. The key is in discovering when it is appropriate and when it is not...and the ramifications of each. |
| So the question: Is it appropriate or not for alcohol to be served to board members at board meetings? |
| The serving of alcoholic beverages to board members at board meetings has been, and is an issue at more than one club across the country. Some clubs have dealt with the issue directly by developing policies that work for that particular club. And it is an issue that has been raised more than once at some other clubs. |
| So what are the opinions of those in the private club industry and how do they feel about alcohol being served to board members at board meetings. As we might expect, the opinions, sometimes corporate, sometimes personal, are quite varied. |
| "Personally, I am uncomfortable with the presence of alcohol at board meetings," says Greg DeRosa, general manager and chief operating officer at the Boulder Country Club, Boulder, CO. |
| "I have nothing against alcoholic beverages and enjoy a cold beer, cocktail, or good glass of wine as much as anyone, but do feel that there is a place for alcohol and that is not in the boardroom of a multimillion dollar organization. |
| "At our club we have a straightforward zero tolerance policy for alcohol in the workplace for co-workers and the hypocrisy of alcohol at board meetings just doesn't fit in our club's culture," he declared. |
| "Board members, while not compensated at Boulder Country Club have a fiduciary responsibility to the members to conduct the club's business in a professional manner. I believe that professionalism needs to be reflective of the larger publicly held corporate world. When conducting the club's business, boards deal with numerous intricate issues and make critical decisions involving large sums of money, as well as delicate member issues. |
| "I believe the general membership would expect an extremely high level of professionalism of their elected representatives and can't imagine alcohol being a part of that expectation," DeRosa said. |
| The folks at Boulder Country Club arrived at the decision as they would any other, with "comments, discussion and ultimately a vote of the board on the issue." |
| David D. Cecil, CCM, general manager and COO of Fox Chapel Golf Club, Pittsburgh, PA pretty much agrees with DeRosa. |
| "Fundamentally, I do not believe it is appropriate to serve alcoholic beverages before or during any meeting when official club matters are discussed. It has been my experience that the consumption of alcohol does not enhance the quality of decisions or actions at such meetings." |
| There is a no-alcohol policy for the Glendora Country Club, Glendora, CA, says GM Ron Banaszak, CCM. |
| "There is no alcohol served at the meeting, but after the meeting has adjourned, board members are served dinner and there's an opportunity to socialize. This gives us an opportunity to deal with our business first and members can socialize afterward." |
| The Honors Course, Chattanooga, TN takes a completely different tack says GM Gerald Daly CCM. |
| "We have four board meetings a year, held at 10 o'clock in the morning and there's no alcohol" served during the meetings. It's strictly a business meeting. "Perhaps the most interesting I've heard," says Daly, "is the club that has its meeting at 7 a.m. on Saturdays. Everyone is fresh, and they get their work done so everyone can go and play a round of golf." |
| So as we see, there are many options that work for different clubs and circumstances, although the majority have a no-booze policy. |
| It's a little different at The Beach Club of Santa Monica where Gregg Patterson is general manager. |
| "Members serve on the board and committees at The Beach Club without compensation - they give because they're asked to give something back to the club through service. Members who serve receive no perks for their service - no special tables at dinner, no free bottles of wine, no special parking spots, nothing beyond the opportunity to spend three to 10 hours a month discussing tactical and strategic issues of concern to the larger club community," Patterson stated. |
| "They're asked to attend meetings during the week, usually at night after working a long day at their paying jobs. As a consequence, club tradition has been that board and committee members receive free food and beverage during their meetings. That said..." |
| Patterson suggests "alcohol is part of the dining experience for most who serve on our board and committees, sometimes a drink before the meal and more often than not wine with dinner. In the interest of "efficiency" the meeting is conducted over dinner. |
| "My experience has been that this format makes the meetings go longer, offers a less "professional" atmosphere than is optimally productive, encourages wide ranging "organic" discussions, works against "linear" checklist style meetings, builds team through lowered inhibitions and often leads to more emotional situations than a strictly 'business only - food and beverage after' style of meeting," Patterson outlined. |
| Cecil has encountered "three different approaches" at other clubs he has managed. |
| "One club chose to offer cocktails and wine with dinner that preceded the official board meeting. This proved time and time again to be a mistake as only one board meeting adjourned before midnight in the two-plus years as general manager," he stated emphatically. |
| "An approach at another club was to conduct the board meeting, then, once all the official business was addressed and the meeting was adjourned, a brief cocktail reception followed by a seated dinner was provided. |
| "This approach," he suggested "placed the business at hand first, and then followed with an opportunity for the members of the board to socialize after the business was concluded." It's his opinion this "provided board members some reasonable consideration for volunteering their time and expertise." |
| A third approach had the board conducting "the business at hand, adjourn the meeting, and enjoy dinner in the dining room at their own personal expense. Often members of the board would gather together with their spouses for dinner that helped to bring some revenue to the club. |
| "Furthermore, there was no criticism from the members at large about the perception of inappropriate 'club-funded' fancy dinners or drinks," Cecil opined. |
| The Fox Chapel GM also feels when alcohol has been served at board meetings a more casual approach has been taken, no matter how important the issues. "Furthermore, I witnessed many times where more rambling and side chatter took place during the discussion." |
| The booze - board issue has been raised in many different ways at many different clubs across the country. At the Boulder Country Club, for example, there had never been an ironclad policy over the years and GM DeRosa said that while there were never any problems with alcohol at board meetings, "it has certainly been an issue of concern and at the very least created some discomfort for directors as well as me. |
| "Recently we dealt with the issue and created a board policy that now eliminates any alcoholic beverages from the meetings," he said. |
| "As we all know perception is reality and even though most directors felt strongly that alcohol never has nor probably ever would play a detrimental role in a decision making process, the perception alone... and the magnitude of a directors responsibility, made the decision easy," DeRosa explained. |
| So this raises other issues...the ability to make decisions, legal complications and fiduciary responsibilities. |
| Kevin P. Bjerregaard is an attorney in Newport Beach, CA and he offers these opinions, some based on California law, but which provide food for thought. |
| "An individual serving on a board of directors owes the corporation and its shareholders a fiduciary duty. Although each state has its own particular definition of 'fiduciary duty,' generally, the fiduciary duty requires the director to act in good faith in a manner that the director believes to be in the best interest of the corporation and its shareholders," he said. |
| "This fiduciary duty requires that a director act in a reasonable manner, and make such reasonable inquiries as an ordinary person in a like position would use under similar circumstances," points Bjerregaard bases on California Corporations code section 309(a). |
| "In many states a director will not be held liable for negligent judgment - so long as the process leading up to the judgment is reasonable," he opined. |
| It is also Bjerregaard's opinion that, as it is under California Corporations code section 5047.5, there may be differences for non-profit corporations in other states. "In many states, the standard of care for a director is lesser if the director is not being paid and is working for a non-profit corporation. In such cases, a director will be held to violate his or her fiduciary duty only if the director acts with gross negligence or in wanton disregard for his or her duties," he added. |
| That may be the law, but what of practical advice? Bjerregaard has plenty and it's pretty straightforward. |
| "Although I have found no case directly on point in this matter, I would advise against serving alcohol during the actual decision making process at a board of directors meeting. If any decision of a director were challenged, surely the challenging shareholder would raise the question, 'why was the director consuming alcohol while making an important decision affecting this club?' |
| "In such a dispute, the consumption of alcohol would probably not be a definitive factor in evaluating whether a decision was inappropriate," he added. "However, at a minimum, the director's use of alcohol would be relevant and would not help the director defend any decision made during the meeting. |
| Bjerregaard says "if a decision is made while 'intoxicated,' there is law that provides that the maker of the decision did not have the proper 'capacity' to make the decision, and therefore the decision is void. |
| "For a court to find a lack of 'capacity' due to the consumption of alcohol, the court will need to find the decision maker was unable to understand the consequences of his or her decision due to the alcohol. |
| Bjerregaard's opinion is short and blunt. "Why take the risk? If a board chooses to serve alcohol at a meeting, wait until the business is concluded and the official meeting adjourned." |
| Some general managers share Bjerregaard's opinion that alcohol can affect fiduciary responsibilities and the decision making of board members. "I believe strongly that it can," says GM DeRosa. |
| "The physical effects of the presence of alcohol in the human body have long been documented and it is a medical certainty that there are physiological changes that occur when alcohol is present. Obviously, all of this depends on the individual and the amount in question. |
| "Given that, it would seem that introducing alcohol into the boardroom would rarely if ever create a more productive outcome, and at the very least, it's presence creates the possibility and opportunity for less than the highest levels of concentration and decision-making," he added. |
| "Fiduciary responsibility is in effect a trust the membership places in their directors to take seriously the running of the club's business affairs. Knowing everything we do about alcohol, I can't image that trust including the consumption of a nice Merlot or frosty Fat Tire Ale while conducting club business. |
| "Why risk the potential for our constituents to draw negative conclusions regarding our director's abilities or intentions?" he queried. |
| "One of the most difficult components of managing a club is the diversity of the members, including those in governance positions. While a policy of this nature is never going to keep everyone happy, I feel it is prudent and appropriate to keep business separate from pleasure," DeRosa concluded. |
| Cecil believes "alcohol can adversely affect judgment of many individuals. Business is business and should be conducted in an appropriate environment. My guess is that the board meetings of Fortune 500 corporations are alcohol-free." |
| While it's a long-standing policy at Fox Chapel "not to offer any alcoholic beverages at any board or committee meetings" there is an exception and that's "the annual board dinner that is strictly a social affair," Cecil said. |
| Although the board at The Beach Club operates differently, it's not for trying. |
| "Each year I present the idea that meetings be food and booze free, that the working meeting be completed before the "eating meeting" begins. Still no luck after 20 years in the same operation," GM Patterson opined. |
| "That said, The Beach Club is very successful using whatever criteria you choose to use. Fact is, any system will work if good people are part of that system. Here there's food and beverage available from the moment the group assembles until the moment they exit. Good things have happened and continue to happen at the club. |
| "It works here because the quality of the participants insures that it does. In an ideal world it would be business only, but in an ideal world they'd be compensated for their expertise and their time," Patterson suggested. |
| "Besides, I talk so much at meetings that I rarely have time to enjoy the meal and drinking for any employee, including me, is strictly forbidden by me. Oh well, the members have a good time..." |
| Publisher's final thoughts |
| My opinion, and obviously that of many in the private club industry, is that alcohol is taboo at boards of directors' meetings. Private clubs are businesses and club business should be conducted in a business-like atmosphere. Alcohol at board meetings sends out the wrong message. Private clubs today are facing many issues such as declining memberships, club loyalty, decreasing dining room sales, aging facilities, rising dues, member assessments, environmental concerns, rising health premiums for staff and the issue itself of finding and retaining good, qualified staff. |
| By approving the use of alcohol at board meetings, it sends a signal it's a social affair, not serious business and it's the wrong message from the beginning to end. Board meetings even at the best of times, can be infused with an emotionally-charged atmosphere. Alcohol can inflame these emotions. |
| Private clubs need to do what's in their best interests and allow decisions to be made based on clear-minded thinking, solid facts, research and what's in the best interest of the club. At least that's the way I see it. |
| John Fornaro Publisher |
| We welcome feedback and comments on any of our editorial features. If you have an idea for a topic you'd like to see addressed in a future "Publishers Perspective," please contact our editorial department at (714) 596-6611 or via e-mail at jody@boardroommagazine.com |