HABITAT

BOARD OPERATIONS

Should Board Meetings Be Open, Closed – or a Bit of Both?

Kathryn Farrell in Board Operations on October 9, 2018

New York City

Transparency II
Oct. 9, 2018

Over the last couple of years, the concept of “transparency” has taken off in the co-op and condo community. Shareholders demand it; new board members promise it; and even the judiciary has started siding with residents in lawsuits. But what does transparency actually mean?

“‘Transparency’ is the buzzword of the moment,” says attorney Steve Troup, partner at Tarter Krinsky & Drogin. “To me, it means advising unit-owners of all board transactions and what’s happening around the building that might inconvenience them.”

However one might feel about the word, though, owners are demanding more of their boards – and they don’t always know what they want. “It’s the perception that counts,” Troup says. “In my experience, while owners say that they want full transparency, very few exercise their rights to obtain it. Knowing that they have that right is satisfying to most. As long as there are no pending issues that negatively affect their lives, most are happy.”

What can conscientious boards do, then, to keep their residents satisfied with their level of transparency? A good place to begin is the board’s monthly meeting, which can be a minefield for any board striving for transparency. The basic decision is deceptively simple: open or closed? Closed meetings can be quick and efficient, but suspicious shareholders can accuse you of hiding things. Open meetings, on the other hand, can be chaotic and lead to information spreading out of the board’s control. How do you discuss sensitive issues like arrears, or potentially controversial issues like a maintenance hike, when the people you’re discussing are sitting right in front of you?

There is, however, a third option. “A suggestion I’ve made,” says attorney Theresa Racht, “is to hold informal, unofficial owners’ informational meetings, where the board addresses concerns and provides updates.” The benefit of such meetings is that the board gets to control what information is presented to the shareholders, and the board can also prepare for questions beforehand.

Open board meetings can take away some of that control. With shareholders present for every board discussion, official business can take longer to conduct, maintaining residents’ privacy becomes tricky, and an audience’s vocal opinion might sway board members’ decisions. “I am absolutely opposed to such meetings,” says Racht, who recalls being invited to a board meeting where chairs for the audience were set up, and the shareholders were actually taking notes.

Those notes can come back to haunt the board. Open meetings allow shareholders to know exactly how board members vote, which could cause animosity because everyone knows who is responsible for an unpopular decision. With a closed meeting, however, the minutes may simply note, “Resolution passed: four votes aye, three nay.”

Open meetings don’t have to be a complete free-for all, though. Attorney James Glatthaar, partner at Bleakley Platt & Schmidt, prefers open board meetings that shareholders may attend without actively participating. “Personally,” he says, “I’m not crazy about a board letting someone interject in the middle of a discussion.”

While an open-but-quiet meeting prevents shareholders from expressing concerns in the moment, it doesn’t solve the issue of discussions becoming public or provide a solution for privacy concerns. Some of Troup’s buildings, however, have found a compromise: shareholders are allowed to attend meetings but are not allowed to sit in on discussions that involve personal details, such as owners in arrears or problem residents.

As with so many board challenges, there is no one-size-fits-all answer to the question of which type of meeting is best for your building.

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