How Does a Board Deal with an Obnoxious Member? Well, It Ain't Easy
Nov. 7, 2013 — On several occasions boards have found themselves saddled with directors whose conduct, attitude and lack of professional understanding have made it difficult for the board to take care of business. I have found that there is no single way to deal with these problems. The New York State Business Corporation Law merely provides requirements for disclosure of conflicts of interest and methods to void contracts, but the issues of the obnoxious, ineffective, counterproductive director rarely rises to the level contemplated by the law.
I have seen directors who
- have one-issue constituents that care only about implementing or stopping of a particular project, such as a roof deck, lobby renovation or gym;
- are focused on issues pertaining to their own apartments;
- have personal issues with other directors;
- are verbally abusive to other directors;
- show no respect for confidentiality of board proceedings;
- threaten litigation against the co-op because they disagree with board decisions; and
- have financial relationships with companies doing business with the co-op.
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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