Arthur I. Weinstein in Board Operations on November 7, 2013
I have seen directors who
My initial recommendation is to educate all directors about the nature of their fiduciary obligations, expected standards of personal conduct and confidentiality requirements. If education through personal meetings and through recommended attendance at courses and seminars fail to change the conduct of the impossible director, the board must consider legal remedies.
Send It to Committee
Most bylaws authorize an "executive committee" of directors to minimize the involvement of the director. However, if the director has a multiyear term remaining, the board may be forced to consider action, governing documents permitting, to remove the director.
Rarely, however, do the bylaws permit the board to remove a director for abusive or counterproductive conduct. The ultimate solution is to present the problem to the shareholders. The law allows a removal for cause when the removal is based on a specifically identified allegation of improper conduct by the director.
Recently, the shareholders of one of my clients removed a dysfunctional director at the request of a majority of the board. The result? A more harmonious, far more efficient and functional board.
Arthur I. Weinstein, an attorney in private practice, is a founder and a vice president of the Council of New York Cooperatives & Condominiums.
Illustration by Danny Hellman. Click to enlarge.
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