Got a toxic board member in your building? Here's how to handle it
A member of our board is habitually disruptive during meetings, starts fights with other board members, and generally gets in the way of out board going about its business. Can I (we) kick him off the board?
"Toxic board members can be a total drag on the business of a co-op or condo and for the other board members who have to endure the extra time and aggravation that a toxic board member brings," says Steven Wagner, a co-op and condo attorney with Wagner Berkow LLP and a longtime board member of his own 420-unit Manhattan co-op.
If you’re aiming to kick this person off of your building’s board, says Wagner, by-laws typically have one or more sections on removal of a board member by the shareholders or unit owners or, in rare instances, by the board if there is good cause. Good cause can consist of a broad range of conduct, but usually involves something more than merely being "toxic."
Usually it will involve conduct which violates a board member’s fiduciary duty although it could be simply that a board member is so obstreperous, inappropriate and/or disruptive that good cause could be shown without a breach of fiduciary duty, such as disclosure of privileged material from the attorneys, repeated disclosure of possibly embarrassing information about individual unit owners, or being so disruptive at board meetings that the board cannot conduct business. These clauses are rarely invoked and usually require a formal meeting with attention paid to due process requirements (i.e., notice and an opportunity to be heard). It’s comparatively rare for boards to go this route, and if you do, you should consult an attorney to ensure that you and your fellow shareholders are following the letter of the law.
But if you can’t plausibly kick this member out altogether, that doesn’t mean you have to let one rotten apple spoil the whole board. Below, 9 more strategies to help you nip your building’s board problem in the bud:
1. Plan the meeting in advance
There is nothing wrong with board members speaking to each other in advance of the meeting to discuss issues and the agenda. If there is a toxic board member, it might avoid long discussions at the meeting if the president or person running the meeting knows the votes are in hand to pass a resolution prior to the meeting.
Similarly, sending out proper and timely notices of the meetings with proposed agendas can focus the meeting and limit extraneous discussions. And remember that if your bad board member tries to derail the conversation, you can rule them out of order or simply tell him or her that the extraneous matter can be brought up under new business or old business under the agenda at a later time. A well-run, organized meeting can cause a disruptive member to lose momentum, and even sometimes to ultimately forget the issue they had planned to bring up.
2. Formalize the conduct of your meetings
Often board meetings are held in a casual manner,and motions, seconding of the motion, and a formal votes are not taken. This gives a toxic member an opportunity to continue discussions during the meeting and to challenge proceedings later on because no vote was taken. Formalizing the mechanics of the board meetings including motions, seconds, a discussion on the motion and then a vote, will make hijacking the meeting by a toxic board member less likely and will allow the discussion to be ended and a vote to be held by “calling the question.”
3. Keep accurate minutes
This is similar to formalizing the meeting. To limit collateral damage inflicted by a toxic board member, minutes should be brief and to the point. For example, the minutes should report that a motion was made and seconded, a discussion followed and the resolution was adopted or defeated. All of the arguments going back and forth between the parties need not be included in the minutes, as seeing this kind of problem in the minutes can cause prospective buyers to balk.
4. Form committees
The by-laws of a cooperative and a condominium typically create or allow the board to create committees to research, investigate and recommend action by the board. Typical committees include a house committee, a legal committee, a finance committee and a sublet and sale committee. There is usually separate authority in the by-laws for formation of an “Executive Committee” consisting of three or more board members who have the power to act on many matters between board meetings. The president often appoints committee members and by not appointing a toxic board member, he/she can control – and thereby limit – the toxic board member's impact on issues handled by committees. If three board members sit on a committee, the committee may be given certain authority to act. However, one important thing to keep in mind in this process: A committee’s authority should be carefully specified in order to avoid or limit the committee’s ability to take action in the absence of board approval or, for example, survey the apartment owners and/or to communicate with the apartment owners without specific approval of the board.
But still, keeping the toxic board member off of the Executive Committee can limit or reduce the impact of the toxic member on the business of the board. Although technically the Executive Committee may exercise many of the powers of the board, it is a good idea to have the board ratify the actions of the Executive Committee.
5. Code of Conduct
Some boards ask board members to sign codes of conduct to govern the behavior of board members. A code of conduct can be effectively used to point out and measure the bad conduct of a toxic board member. Some codes of conduct contain confidentiality agreements which prohibit discussions of board activities outside of the meeting. Wagner cautions that confidentiality rules should include language which allows board members to publicly discuss issues if failing to do so would put a board member at odds with his/her fiduciary duty. For example, if the board is doing something improper or illegal, the board member should not be prevented from disclosing it by a confidentiality provision in a code of conduct. Confidentiality rules could also become a sore point and political liability if the apartment owners feel there has been a lack of transparency by the board.
6. Impose a sanction
A board member can be sanctioned by the board for improper conduct, although this process is usually strictly limited by the by-laws and statutes, so sanctioning will simply be a resolution highlighting the toxic, improper behavior and will not have any impact on the ability of the toxic board member to continue on the board. However, his can also be useful documentation later down the road if there are efforts to formally remove the member from the board.
7. File a civil lawsuit
There are instances when board members bring suits against other board members for personal attacks. These usually involve defamatory statements or menacing behavior such as discrimination, accepting kickbacks, or stealing money. The lawsuits may not seek to stop the offensive conduct, but they usually do have a chilling effect—or lead to a settlement—as board members don’t always have the money or the time to go through an entire lawsuit.
8. Criminal Actions
If the conduct is bad enough, it may be possible to initiate criminal proceedings either with a complaint to the local police or the district attorney’s office. A protective order prohibiting contact or communications by the defendant with the complainant carries a sanction of arrest if violated. In one building, criminal complaints were taken out by two different board members which effectively prevented a board meeting being held without risk of arrests.
9. Elections
If all else fails, there is always next year’s annual election, when you and your neighbors can organize to ensure that this bad board member gets the boot, for good.
New York City real estate attorney Steven Wagner is a founding partner of Wagner, Berkow, & Brandt, with more than 30 years of experience representing co-ops, condos, as well as individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272.
Related:
How do I buy a co-op or condo under an LLC?
How to tell if your property manager is taking kickbacks—and what to do about it
How to keep your co-op and condo neighbors from renting out their apartments on Airbnb
