Companies cover director travel and other reasonable expenses associated with their board service – and some also cover guest travel and even purely personal flights for safety reasons. But how this is accomplished varies significantly by company, and sometimes it changes within particular companies as board composition morphs over time.
Although not required, many companies have policies that help guide what is permissible – and what’s not – when it comes to director travel and reimbursement. Director travel and expense reimbursement policies are either embedded into a broad corporate travel and expense policy – known as a T&E policy – or exist as a stand-alone policy just for outside directors.
The policy typically is overseen by the corporate secretary. But its implementation, such as the collection of the receipts, might be handled by another department, like finance or treasury. Your company might even have a separate travel department that handles much of the details and paperwork.
Here are five hot tips about director travel you should know:
- Bare-bones policies should set boundaries
- Duck problems with air travel
- Use the policy to say ‘no’
- Train those implementing the policy
- Never delegate all the menial travel tasks
1. Bare-bones policies should set boundaries
Let’s start by acknowledging that this travel stuff for directors is a real pain in the butt to administer. The key is to have a conversation with the board up front about what their expectations are.
Get them invested in the policy. What’s in a policy often depends on who’s on your board the last time it was revisited. Changes to policies often take place after there’s been a particular issue with a particular director.
Talk to the board about the limits concerning what you can deduct for tax purposes. Talk to them about proxy disclosure.
Be strong. You have to be grown up about this stuff. You don’t want to be constantly dealing with, “Can I bring my son on the plane? My dog?”
Having said that, most policies are bare bones and cover only the basics. If you’re lucky, it will have 10 pages of guidance regarding “dos” and “don’ts.”
A T&E policy should outline what expenses are covered. And on rare occasion, it might include deadlines for when a director can seek reimbursement and the particulars of the documentation process. Normally, that stuff is not in the policy itself; instead, instructions about how to accomplish that are given to the directors informally.
2. Duck problems with air travel
If you’re going to have a problem, it’s likely going to be about a plane. For example, a director has their own personal plane, and it looks inequitable compared to other directors if they’re reimbursed for the costs of that director flying themselves in.
It winds up hurting feelings, not to mention the complexity of how to handle it. So it’s good to have parameters about flying. A smart policy provision? Only reimburse for a first-class ticket’s value?
Remember the goal of a policy is to provide clarity to directors regarding expenses that are considered “reasonable.” A first-class ticket reimbursement sure seems reasonable to me, but it might not seem reasonable for boards of smaller companies.
3. Use the policy to say ‘no’
Don’t wilt. Unfortunately, being the corporate secretary means sometimes you have to be the “no” guy or gal. Sometimes you have to push back, even though the customer service professional inside of you is screaming otherwise. Only by setting boundaries can you properly do your job.
That’s why it’s smart to have a policy that addresses issues you foresee with a particular group of directors. You need a written document to lean on so you can make that the “no” guy instead of you.
4. Train those implementing the policy
Quite often – and surprisingly – your staff won’t be the ones collecting the receipts. It might be someone in finance, treasury or internal audit. If so, you’ll need to train those handling the receipts. Train them on disclosure issues, tax issues and what the independent auditors will be checking on. And, of course, train them on what isn’t permitted under the director’s T&E policy.
You want to train them so they know enough to come to you with very specific questions. You need them to be issue-spotters.
5. Never delegate all the menial travel tasks
This tip may surprise you, but it’s the best tip I have here. Sometimes call the director yourself. Explain that your right-hand assistant made the arrangements but they’re too busy to make this call. You’ll be surprised what nuggets you’ll learn.
They’ll be happy to hear from you and will tell you things they might not otherwise because it’s more of a social call. They’re not put on the spot. “I’ve been meaning to tell you … .” Real substantive, critical things that you may not have otherwise heard about until it was too late.
Authored by
Broc Romanek