A Conversation About: A Renegade Director

Bronx Co-op: An officer on our board acts like a renegade – gets an idea and acts on it, usually without asking the other directors. He will move lobby decorations around, check up on the superintendent (even though we have a managing agent), post notices without waiting for all board members to read/approve them; draft board minutes but refuse to show them to the president or the vice president; and now, this week, he even phoned a bank’s security system and changed a bank password in order to see the balance in an account (he is a signer), but told no one, preventing access by the president, who normally monitors the account. Does anyone have suggestions?

GK: We had a similar problem with a previous board president who frequently acted unilaterally and without consulting the rest of the board: major capital improvement projects, sales of apartments, interviews with potential buyers, meetings with the managing agent, posting public notices supposedly from the board but drafted entirely by him and without feedback from fellow board members – basically a disaster that frankly our building is still recovering from. Check your bylaws. They should outline the responsibilities of directors and should also allow for removal of a problematic officer. Remember, too, that in many corporate structures, officers are appointed by their peers on the board. That means that someone’s peers can also reappoint an officer to a different position whose responsibilities may be more limited.

It is not a healthy situation for one person to make decisions unilaterally for a group of people. Take your fiduciary responsibility to heart and make every effort to check this behavior ASAP. Your shareholders, whom you were elected to represent, are not being well served by such behavior.

J: This behavior is not only detrimental but is also illegal under New York State law (“It is the board, not an individual, that makes policy”). I understand the problem because, unfortunately, it has existed in my co-op for many, many years: one person decides everything and that is it, which has been very destructive to our co-op. She does not take a board vote or even allow discussion – however, our problem is that the majority of the board thinks she can do no harm and don’t care. If that situation exists in your co-op, then I would contact a lawyer or read the law book McKinney – Consolidated Laws of NYC BCL – Book 6 Section 600-820 - Section 701-720, which discusses the laws that pertain to the board and with this and enough backing from the rest of the board vote the person out.

CDT: This is messy and potentially very damaging to the co-op. As an officer, this renegade has the power to cause more serious problems than if she were simply a director. What if she were to sign a contract or other legal document on behalf of the co-op without consulting the rest of the board?

I agree that an informal but firm talk with the officer should be your first step. From your description, however, it sounds like things are well beyond that point. Changing bank passwords and refusing to show drafts of minutes to the president and VP goes well beyond “helpful” experiments with lobby furniture arrangements.

The good news is that many co-ops’ bylaws allow for the removal of an officer by a simple majority vote of the board. Our bylaws contain the following clause: “Any officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the then authorized total number of directors.”

That will eliminate the worst exposure. A director who is not an officer does not have the power to sign documents on behalf of the co-op (unless you have very unusual bylaws). However, if you want to remove this person from the board, that will probably require a special meeting of shareholders. Boards usually don’t have the authority to kick out directors, except in exceptional circumstances. For example, the last revision to our bylaws allows the board to remove a director who “fails to attend three consecutive meetings of the board or five meetings in any 12-month period ... or who is more than two months in arrears in paying maintenance and assessments.” Best of luck with this awkward and difficult situation.

Bronx Co-op: Thank you very much for your reply. This director has told me she wants to fully air directors’ “duties, rights and responsibilities” at the next meeting. I replied that directors don’t have “rights” and suggested she read our bylaws. Believing she has “rights” might be at the root of the problem. I’ll keep you all posted.