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Habitat Magazine Business of Management 2021

HABITAT

BOARD OPERATIONS

HOW CO-OP/CONDO BOARDS OPERATE

Ask Habitat: How Many Board Members Should Our Co-op or Condo Have?

New York City

Ask Habitat: Number of Board Members
Oct. 27, 2014

HABITAT ANSWERS: The bylaws of most cooperatives and condominiums provide the mechanism for change. Co-ops and condos with this type of provision can reduce or increase the number of directors by passing a shareholder resolution. This is done at the annual meeting by majority vote of those present before the actual election, or at a special meeting. 

Some bylaws establish a set number of directors, such as seven, and do not provide a mechanism for changing that figure by shareholder resolution. If your co-op or condo has such a bylaw, then you can only change the number of directors by amending the bylaws.

What's the Magic Number? 

Directors and shareholders often ask, "How many directors should we have?" The answer depends on at least two factors. First, do you want to have a staggered board of directors, which is a board that has a "class" of its members elected in one year and the balance of the board comprising another "class" elected in the following year? The members of each "class" are often elected for two-year terms, so the use of a staggered board permits continuity of service. 

The second question to be answered is "How large is your building?" It makes little sense to have a nine-member board in a small building. Conversely, a large building with a small board often suffers from overworked board members and shareholders who are disappointed in not having the opportunity to serve on the board.

Bigger May Be Better

You should have enough people so that the work of the cooperative can be accomplished without causing directors to "burn out" from overwork. Having a larger rather than a smaller board enables it to create committees consisting of several board members who can report their recommendations for action to the entire board.

Should the directors all be residents? Residents can more readily attend to cooperative and building issues. Sponsors, holders of unsold shares and other investors often object to such a provision because they believe they should have a board seat to protect their investment. Bylaws can be created that require board members to be resident-shareholders, except for those elected by the holders of unsold shares (usually the sponsor and investors). That will generally satisfy both groups and result in a board that represents the point of view of both residents and non-residents.

 

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